You are all hotshots – I know.
As many of you have suggested “trading the fundamentals” is akin to “reading the entrails of dead animals” ( essentially suggesting that “pure technical analysis” is sufficient ) – what are your thoughts on USD/JPY?
JPY ( Japanese Yen ) being the largest contributing factor in the current and seemingly “never ending rally in risk” ( as Japan’s “printing machine” currently dwarfs that of The United States ) – why isn’t USD/JPY making “massive upside moves” along side the ridiculously manipulated run up in U.S Equities?
If currency markets where “taking the bait” wouldn’t we see USD/JPY bursting higher, then higher, and even higher alongside the current ponzi playing out in U.S Equities?
From a purely technical perspective the chart pattern seen above ( a descending triangle ) is extremely bearish – suggesting that the pair will “eventually break through support” and likely waterfall lower.
The Central Banks of both Japan and The Unites States are hell bent on preventing this from happening but…..would you imagine the opposite?
Risk at all time highs…but the “ultimate suggestion” of risk ( borrowing JPY at 0% and investing it in U.S Equities” in seeking yield ) hasn’t done jack shit for the past 6 months.
I invite you all to weigh in – as fellow readers can only benefit from the potencial “pissing match ” to ensue.
Perhaps a cat’s got your toungue? Or maybe you’re out in the back yard now…looking to kill one and have a good look at it’s insides – with hopes of figuring this out.
Good luck with that.
JPY ( Japanese Yen ) being the largest contributing factor in the current and seemingly “never ending rally in risk” ( as Japan’s “printing machine” currently dwarfs that of The United States )
Do you have numbers, sources? I ask because you’ve said it a couple of time, and while i never really did any digging i do remember reading once that US QE was greater, rather than the other way around. It’d be great if you could provide some material backing this. I’ll do some research of my own but i you already have links at hands, you’d be a time saver.
It’s very well documented.
Here’s at least one link: http://www.zerohedge.com/news/2013-04-04/if-japans-shock-and-awe-qe-happened-us
Perhaps could it be that every Tom, Dick & Harry are short the Yen, so who’s left to sell? Given that the COT data shows largest short position in history, difficult to see it going further down materially (bar a change in CB policies, i.e. a further round of ‘printing’). Conversely, the fact that it is not strengthening materially is more significant to me than the fact it is not falling further.
You may have this flipped around / backwards as…..
If everyone is “already short Yen” then essentially Yen has nowhere to go but up!
JPY Up = USD/JPY down
JPY is not strengthening? A look at the chart of Yen Futures since the beginning of this year would certainly suggest otherwise no?
It’s the largest “ascending triangle” I’ve seen in a while…suggesting breakout to the “upside” in my books.
Well, this may sound naïve, but it looks like someone with deep pockets is accumulating a position just above the 101 level. Price seems to race away from there faster than it returns.
I think it was you who said that large positions take time to build.
I’m on the other side of that trade, with consideration that “indeed” accumulation is taking place yes….only it’s “yen” not USD.
The EW brigade might see this as a wave 4 consolidation triangle before a wave 5 top ($xjy). There are many seeing a direct relationship between yen and gold with gold to follow yen. (just as an aside)
The TA brigade might call this a falling wedge and it does have a pretty flat bottom (usd/jpy). As you suggest this should fall through resistance.
In either case we are nearing the apex and in the last day yen has fallen out of the EW triangle.
Will it be brought back into the triangle or will the TA falling wedge regain control?
I can only guess and time will tell.
I see the relationship between Yen and Gold too in that….I expect both to move higher.
Nice overview. It looks like you’ve got your head on straight here!
3 fundamental reasons that have affected the USD/JPY.
1. Unwinding of the 2013 short yen/long Japanese equities trade – Every hedge fund had this trade on in 2013 and had to reverse their positions as Japanese equities sold off in January. Obviously unwinding this trade meant covering their yen shorts or buying Yen
2. Foreign Holdings of JGBs have soared – A recent report showed that foreign holdings of JGBs have soared in 2014 to a record level of 8.3% as the country is increasingly looking to investors abroad to finance their debt. When foreign investors want to buy JGBs they need to sell their local currency and buy JPY first keeping a bid under that currency.
3. Traders frontrun a more dovish Fed – Zoom your chart out a little more and you’ll see that selling in the yen started several months (September) prior to Abe’s election in 12/2012. Speculators were anticipating his election and the start of Abenomics so they frontran the official announcement. With growth decelerating in the US, housing slowing and unemployment trends soon set to reverse, traders were anticipating the Fed turning more dovish earlier in the year. Same dynamics that drove bond yields lower (positive correlation between USD and 10 yr yields) and gold higher.
Great stuff Steve….with point number 1 only just getting started.
When Carry trade “truly unwinds” Yen takes massive , MASSIVE, MASSSSIVE inflows.
We’re just seeing the tip of the iceberg in my view.