The Path to 175 Opens on USDJPY

USDJPY 175 incoming on a breakout. My thesis is simple: higher commodity prices are going to kill the yen. I think this is the best way to play a breakout in crude and you can do it very very cheaply.

Let's play lotto! YCS is the 2X short yen fund. The leveraged currency funds are great securities because the daily compounding effects that cause incredible drag on most leveraged stock ETFs are not a problem for less volatile currencies. You can see YCS actually slightly outperformed this year because the compounding worked in its favor:

YCS calls aren't liquid, but if you can get filled at a good price, it's a good option. I purchased OTM puts on yen futures. If USDJPY makes it to 150 by November, I will 10x my capital outlay. If it makes it all the way to 175, unlikely unless there is a crisis this year, then it'll 40x.

On this chart, WTI crude oil is overlaid. The scale for CL is arithmetic.

Click on the yen tag to see prior coverage of the yen. In January of this year, I asked Ready for the Yen Shock? I don't think the shock has arrived yet, nor is it expected, which is why I think the puts on the yen are cheap.

Finally, here is ZB with JPY. This relationship hasn't always held, but it has been tight for many months now. It should stay tight at least until the move completes, unless there's a major currency crisis that sinks treasury yields, but cripples all non-USD currencies.