The yen closes year decreasing for the third time in a row amid expectations the Bank of Japan to continue to expand the program of quantitative easing, which leads to a depreciation of the currency. Additional pressure on the exchange rate has the fact that Japanese economy in the last quarter plunged into recession. So, in early December, the final GDP was revised downward to 1.9% year on year in the third quarter of 2014, Cabinet Office of Japan informed, confirming that economy went into recession. For this reason, the foreign exchange market is preparing to further yen reduce.
According to the median forecast of economists and strategists surveyed by Bloomberg, USDJPY pair in 2015 will decrease to 125.00. Dollar index closed the year’s with largest annual growth since 2004 in anticipation of rising interest rates by the Federal Reserve. Today, the financial markets in Japan, South Korea, Thailand and the Philippines were closed in observance of the New Year.
This afternoon, USDJPY currency pair traded slightly lower after a decline in the European session earlier in the morning. US stock market opened in the green zone, so we decided to buy Call option on this currency pair on the opening of the US trading session at 14:30 GMT. The option price was 119.572 and the time of its expiration set on 15:30 GMT.
Today, our forecast was not justified. By 15:30 GMT, USDJPY currency pair fell to a level of 119.522. Thus Call option has brought us a loss of $100 dollars. The final outcome of the trade for December is -150 dollars now.
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