Rationale
Higher USD/JPY is a longstanding view we have had, but we took profit in January as the upward trend petered out and the market appeared to be overly short yen. With the US recovery moving onto a firmer footing, and the US 10-year yield poised to move higher, we believe this is an opportune time to re-enter the long USD/JPY trade.
Expression
We express the view through a simple spot trade. In our FX Weekly dated 31 July we will investigate how to reduce the cost of going long USD/JPY calls.
Mechanics
Buy USD/JPY spot at 102.60 targeting 105.00 on an interim basis, with a stop on a daily close below 101.70.
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