The EURUSD closed above the 1.25 mark yesterday and has been trading around 1.24-1.245 during the day after as expected Euro CPI and slightly lower US CPI data releases. USDJPY has traded in a small range and we expect low volatility to remain mild while awaiting the FOMC rate decision and statement to follow, taking place at 19GMT.
A short duration position towards today’s meeting can be an interesting combo of options on EURUSD and USDJPY. The graph below shows that USDJPY is much lower since its highs this month whereas the EURUSD has had a very small range in comparison so for the near term, it seems like the USDJPY has more to go up than the EURUSD has to go down.
In general and for longer term, I wouldn’t go as far as stating that you can trade correlation with these two pairs but towards tonight’s meeting and after we get the Euro data out of the way, we can put on an interesting position that can be considered relatively hedged until the renewed Asia session.
In the combo below, I have bought a Call on the USDJPY ATM (strike = 117.383) with 1 day duration and on the EURUSD ATM (strike = 1.24157) also with a 1 day duration. Premium at open is $651 and $528 respectively. Depending on the statement, if the words “considerable time” will be dropped as anticipated in regards of keeping rates low, we expect the Dollar to strengthen and see the USDJPY rise while EURUSD trades lower. If the words remain in statement, we expect the opposite to occur and depending on the magnitude of the moves in each pair, you may see the profit of one position out way the loss of the other.
A short duration position towards today’s meeting can be an interesting combo of options on EURUSD and USDJPY. The graph below shows that USDJPY is much lower since its highs this month whereas the EURUSD has had a very small range in comparison so for the near term, it seems like the USDJPY has more to go up than the EURUSD has to go down.
In general and for longer term, I wouldn’t go as far as stating that you can trade correlation with these two pairs but towards tonight’s meeting and after we get the Euro data out of the way, we can put on an interesting position that can be considered relatively hedged until the renewed Asia session.
In the combo below, I have bought a Call on the USDJPY ATM (strike = 117.383) with 1 day duration and on the EURUSD ATM (strike = 1.24157) also with a 1 day duration. Premium at open is $651 and $528 respectively. Depending on the statement, if the words “considerable time” will be dropped as anticipated in regards of keeping rates low, we expect the Dollar to strengthen and see the USDJPY rise while EURUSD trades lower. If the words remain in statement, we expect the opposite to occur and depending on the magnitude of the moves in each pair, you may see the profit of one position out way the loss of the other.
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