Day three - potential Japan 225 trade

At the beginning of the week I suggested buying the Nikkei on dips into the 15,500 region.

Source: Bloomberg

Following on from my potential idea on Monday, this trade has now been triggered and is currently slightly ahead heading into Asian trade. Some positive US data overnight helped the US dollar remain bid and in turn underpinned USD/JPY.

Durable goods orders, consumer confidence and the Richmond manufacturing index all showed strong signs of growth. This was the biggest ever jump in durable goods. Don’t forget though, the surge in durable goods was a bit skewed as it was driven by a spike in orders for commercial aircraft. With the Boeing 787 enjoying significant interest, this is hardly a surprise.

The Case Shiller index also showed the US economy is enjoying a steady recovery. Additionally, geopolitical risk was somewhat downgraded and played into the hands of USD/JPY.

Friday will be the key for this trade as a raft of economic releases are due out of Japan. For now though, I’m happy to place stops at 15,350 with an initial target at 15,788.

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