Marketlicious

The market movement of the past weeks after the recent earthquake in Japan has convinced me that a major top on Japanese Yen is in place.

Fundamental
- Possible further money printing by the Japanese government (like what has been done by the Fed in QE1 and QE2) to fund reconstruction work in Japan which would depreciate the Yen in long term.
- USDJPY is more than 10 percent below Japanese exporters' breakeven rate and thus putting political pressure to bring down the Yen.
- G7 intervention and promise to put a floor on USDJPY at the 80 level.

Technical
- The weekly chart of CurrencyShares Japanese Yen Trust (Symbol: FXY) shows a long upper with ultra high volume signaling major reversal.
- A double top pattern is identified with the first top formed on the week of 1st November 2010 and the false breakout on the week of 14th of March 2011 serves as the second top.

Trading Ideas
The simplest way to play this setup is to buy the USDJPY pair at the spot market on margin at current level with a stop below the March 16th spike low at the 76 area. Yes, the stop is huge but considering this is a long term trade with a target of the 110ish area, the risk to reward ratio is more than acceptable.
If one has faith on the G7 that they will not allow a dip below 80 on USDJPY, a safer way to trade this is to sell a Bear Call Spread on FXY above the 125 level.



Matter of Concern
- Volatility causing a position to be stopped before going the desired direction. As the saying goes, "market can remain irrational longer than one can remain solvent."