From a risk/reward perspective, if you want to be long the USD/JPY or Nikkei futures, this is the time to do it.

However, considering the risks fundamentally (loss of faith of Abenomics, massive JPY short positions, Japan starting its nuclear power programs again, etc) and the risk of the JPY carry unwind (which, as many know I am not a believer of this story but the market still trades on it like the AUD has an 800bps advantage over the JPY still…lol) should risk aversion pick up, you may think otherwise.

I want to turn your attention to the massive supports both sit on:

The USD/JPY is sitting on the massive 101.00-101.50 support

The Nikkei massive support is at 14,000.

If you are like me, and trade correlations, then you also know the JPY (6J) and SPX have a very strong inverse correlation.

And here is the 10 Year and JPY (6J):

Lastly, here is the USD/JPY (candle) matched up with the E-mini’s, Nikkei and Bonds.

Correlations in markets are a lot like dominoes. One falls, it tends to knock down the other, then the other…

Playing long risk is fine for now, but the USD/JPY or Nikkei are so close to support, if they break down, you better “watch your 6!”

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer, I am long the JPY against most major currencies and have been for weeks.