How to determine which JPY currency pair to trade?
Yen shorting as long as Abe/Kuroda maintain their stance
A major trading theme last month was Japanese Yen depreciation when BOJ Governor Kuroda announced surprise stimulus on 31 October. That announcement made USDJPY move 300 pips in a day. As long as this resolve to depreciate JPY is in place, a trend-following trade should be shorting JPY against other major currencies. In addition, Prime Minister Abe announced snap election to be held on 14 December. It is highly likely that if his party wins, Abenomics will continue. Therefore JPY-shorting should be fashionable as well after elections.
Question: Which currency pair is best for shorting JPY? Answer: Short JPY against the strongest major (or a commodity currency). But which one?
Pairing the strongest with the weakest (Yen): a simple way
Here is a month to month chart of the trading performance between the strongest and weakest currencies. Naturally from here, you will want to pair a strongest moving currency against Yen (which is the weakest) for the maximum movement. This chart is from Finviz.com.
From the chart, you could see that on a month to month basis, JPY has been the weakest among all currencies with the drop of -5.73%. NZD is leading in just a slight positive of 0.19%. So you should naturally choose NZDJPY for the maximum possible movement. USDJPY is the second most attractive pair while AUDJPY should not have a lot of movement.
The chart below is from Barchart.com. This also shows a few other currencies pairing on the strong range to weak range. Note that the JPY crosses are on the top range. This shows JPY is very weak and the best to trade out of all they JPY cross is NZDJPY. AUDJPY would be an under performer.