USD/JPY: looking to benfit on a fade? - TDS

Analysts at TD securities explained that an unexpected move below 105.50 would put us back on a neutral footing, however, and target a deeper correction to 103.10. At this stage, they do not assign a high probability to this scenario, however.

Key Quotes:

"Investors whose mandates permit the use of options may also consider shorter-dated USDJPY put spreads that would benefit if the recent rally fades. On a spot ref 109.95, a 1M 30-/15-delta put spread (107.80/105.62 strikes) costs 36 USD pips.

By also selling a 1M 19-delta (113.47) USDJPY call, the cost of this strategy is reduced to zero in terms of initial outlay, but carries the risk of loss if spot is trading above 113.47 at expiry."