Japanese investors, led by Japan's Government Pension Investment Fund (GPIF), seem to have stepped up USD/JPY buying, causing it to explode higher.
A run of dire economic news out of Japan has stirred talk the country is already in recession and that Japanese funds were dumping local assets in favour of U.S. shares and gold nL8N2AK324.
In times of improving risk appetite, funds usually flow out of the safe-haven yen.
On Wednesday, USD/JPY saw its biggest daily gain since Aug.
13 2019, breaking through to close above the major 110.53 Fibonacci level, a 76.4% retrace of the 112.40 to 104.46 (April to August 2019) drop.
FX traders wanting to insure against a USD/JPY rise could buy a two-week 112.00 USD call option at a cost of 50 pips, priced with spot at 112.00.
Profit potential is unlimited if spot is above the 112.50 break-even point at the Mar.
Losses are limited to the 50-pip premium paid.
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