Long Cny/Jpy: the Decade trade

In December, date of the historic trade agreement / exchange between China and Japan, we suggested a trade noteworthy for the months ahead concerning the long Yuan short Yen strategy. From that moment CNY / JPY  lifted from the lows of the last 10 years (11.84), in an almost vertical climb up to 13.30, after having drilled upward the 100 week moving average, resistance that had held the cross rate from 2008 until that moment. To foster that view, there were historically low levels for CNY / JPY, already tested in 1999 and 2004, but also a negative state of the 100 week RoC, just the ideal condition to attend a restart.
After starting the first bull and with the appearance of the fears of European debt crisis, the Yen has also gained strength against Yuan and now it is back exactly at the 100 weeks average of 12.50, which should buffer the downside. Our long-term goals remain anchored at the top of this horizontal range that characterizes the market from 10 years now, that is the 16/16.50 area. Considering the negativity of the RoC at the moment, the chance of a low-risk entry is quite interesting (chart source: Bloomberg).


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