3 Conviction Trade Ideas – Monday 12th May
A 90‑day suspension of tit‑for‑tat tariffs between Washington and Beijing has jolted global FX markets into a classic “risk‑on” rotation. Carry and commodity currencies—led by the Australian and Canadian dollars—have surged, while traditional havens such as the yen continue to unwind last month’s defensive premium. Simultaneously, the Federal Reserve’s hawkish “pause” keeps U.S. yields elevated, reinforcing broad yield‑differential pressures against the JPY. Against this backdrop we reassess our highest‑conviction trades across AUD/JPY, CAD/JPY and CHF/JPY, refining entry zones after Monday’s break‑outs. Below are 3 conviction trade ideas for the new week.
3 Conviction Trade Ideas:
| Rank | Pair & Direction | Trade Horizon | Entry Zone | Stop‑Loss | Targets | Risk : Reward | Detailed Rationale |
| 1 | AUD / JPY – BUY the dip | Intraday & Swing | 94.20 – 94.00 (minor flag floor & 23.6 % fib of Monday leg) | 93.40 (below broken bull‑flag roof & 21‑HMA) | 95.90 (i‑day) / 97.00 (swing – measured move of April‑May range extension) | 1 : 2.6 / 1 : 4.6 | • 90‑day US–China tariff pause turbo‑charges pro‑cyclical Aussie and drains haven bids from JPY.• China export surprise (+8.1 % y/y) and buoyant iron‑ore prices reinforce AUD demand.• Yield‑spread widening (AU 10‑yr 4.12 % vs JP 0.75 %) keeps carry bid alive.• 4‑h RSI has reset from 78→60 – room for fresh momentum once pull‑back retests 94‑handle. |
| 2 | CAD / JPY – BUY on pull‑back | Intraday & Swing | 105.50 – 105.30 (previous breakout shelf & 38 % fib of Monday rally) | 104.60 (under 50‑HMA & micro‑trend) | 107.00 (first swing fib cluster) / 108.30 (Aug‑23 peak) | 1 : 2.1 / 1 : 3.7 | • Crude bounce + upbeat risk sentiment favour CAD; JPY remains heavy on trade euphoria & BoJ caution.• Canada data calendar light; pair trades purely on global beta and oil correlation.• Price broke a 4‑month descending trendline Friday; bullish continuation pattern projected 108+.• Momentum north while ADX >25; looking to enter on shallow retrace into 105.5 zone. |
| 3 | CHF / JPY – BUY continuation | Intraday & Swing | 175.20 – 175.00 (20‑EMA retest / mini‑flag) | 174.20 (under last‑hour low & trend‑support) | 176.80 (i‑day high) / 179.00 (range projection + 161.8 % fib of Apr leg) | 1 : 2.1 / 1 : 3.9 | • CHF underperformance paused as SNB hints at more cuts, but JPY even weaker with haven demand draining.• Swiss CPI at 0 % y/y keeps CHF funding‑currency status; carry inflows chase higher‑yielding CHF over negative‑real‑yield JPY.• Break & close above 175.00 completed bullish cup‑and‑handle; measured target ≈ 179.• Slow‑stoch just crossed up from mid‑line on daily chart – room for upside extension. |
Summary
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Macro tone: The tariff truce eases recession anxiety, boosts global equities and commodities, and dampens demand for the yen. Higher U.S. Treasury yields and stable crude prices amplify CAD strength while China’s export beat underpins the Aussie.
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Technical posture: All three crosses broke multi‑week resistance on the news‑flash. Pull‑back entry zones (AUD/JPY 94.20‑94.00; CAD/JPY 105.50‑105.30; CHF/JPY 175.20‑175.00) align with fresh support shelves and Fibonacci retracements, allowing traders to capture continuation flow without chasing tops.
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Risk controls: Stops tucked beneath immediate trend pivots (≤ 1 %) protect against an abrupt headline reversal, while tiered profit objectives (intraday and swing) deliver risk‑to‑reward ratios ranging from 1 : 2 to 1 : 4.6.
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Catalysts ahead: U.S. CPI/PPI, Australian confidence and business‑conditions prints, plus any BoJ commentary on imported inflation could either accelerate or briefly stall yen weakness—offering tactical add‑on or exit opportunities.
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