As in other currency markets, the price action in the March Yen this week should allow for a re-entry of a well-entrenched downtrend pattern. However, since we can’t rule out a sharp year-end short-covering bounce back to an old gap up at 88.93-89.06, traders might consider waiting for a spike in the March Yen above the 87.50 level before entering long put plays. Since we don’t think the Russian situation can stop on a dime, traders might consider the purchase of a Yen strangle with the intention of banking the long call profits on a continuation over
the coming sessions, and at some point next week sitting with just the long put.
Technical Outlook: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market’s short-term trend is positive on the close above the 9-day moving average. The market’s close above the 2nd swing resistance number is a bullish indication. The near-term upside objective is at 87.67. The next area of resistance is around 86.94 and 87.67, while 1st support hits today at 85.16 and below there at 84.12.