The G20 statements more or less give the continued currency war a big fat A O.K – so we can only imagine that the good ol Yen (JPY) will continue to take a pounding. As nothing moves in a straight line… I can’t help but ask “when will we see a counter trend rally?” but all things considered – it may not be quite yet. The trade implications could very well co inside with a couple of my previous posts:
Currency Wars – Japan Turns Up The Heat
Here I outlined the topside possibilities in the pair AUD/JPY being as high as 1.05. As extreme as this may have sounded at the time, the AUD/JPY pair has provided me with some of the largest profits to date – and deserves another look.
Forex – Trade The Fundamentals First
Here I suggested that the long-term trend in the pair USD/JPY has indeed based… and in turn reversed. The trade here has been massive – and as suggested one of the best trade ideas of the coming year.
Blow Off Top – Retail Bagholders
A caution to readers that we are nearing a near term “topping process” – and that often these moves present a massive “spike” as Wall Street hands the bag to the poor retail guys buying at the absolute top.
Now I can only do my best to put the pieces together as I see things happening in real-time – but should “all things Kong” play out as suggested well……..wouldn’t that be dandy? In all – my suggestion / plan to be 100% cash by mid March is soon upon us so…I will be watching closely and suggest you do the same.
The outcome here (whether it be next week …or a couple more weeks) “should” see a very large move UPWARD in USD ( as fear grips markets and safe havens are sought) as well JPY – coupled with a considerable correction in the U.S Stock Markets and “risk” in general.
As backward as it may seem (and almost “sick” in a sense) in the back of mind – I am already formulating LONG USD IDEAS.
Interesting. Great calls Kong. What specifically is ringing the warning bells here?
Thanks – It’s rare that any one thing “rings the ol magic bell” but when observing currencies much “like corks on an ocean” there are points in time where some reasonable assumptions can be made. The ol USD has it’s place, and as much as it’s a dead horse – fear is fear so……it still takes a lions share of inflow when risk turns south.
Stock prices are stretched to say the least – and the SP serves as a decent “risk barometer”. As well I think the cat is well out of the bag that Uncle Ben’s printing really only serves to elevate stock prices, and now that Japan ( as well others ) have their hats in the ring – could we seriously consider this providing the desired effect “to eternity”? – nope.
It pains me to consider USD improving as a pure and simple measure of “fear” but…….as it’s “still” the world’s reserve currency – likely so it goes.
At least for another round or two.
I have been considering doing the same re long USD. thanks for your insightful blog posts.
Thank you for your time and readership – I guess great minds do think a like.
Lets see how things develop here in the coming weeks.
Hello Pot Stock Watch, I followed you here from SMT. Enjoy your comments and observations. I doubt I’ll ever own a currency contract but your macro observations help me keep my bearings in the markets I do invest in. TY!
Power Corrupts – I love your handle!
Thanks for stopping in over here – and please don’t be a stranger.
Hi Pot Stock Watch….I am a novice and a bit confused…u said a very large Upmove in USD and JPY…..does it means yen will weaken or strength…so for USDJPY is it a buy or sell..??…Tks for yr clarifications and teachings. The outcome here (whether it be next week …or a couple more weeks) “should” see a very large move UPWARD in USD ( as fear grips markets and safe havens are sought) as well JPY – Pat Ng
When looking at USD as well at JPY these are both considered safe haven currencies – and BOTH should generally RISE (against other currencies) in times of risk aversion….ok…that being said – what to do about the pair USD/JPY? Great question!
As both countries are printing like mad…..it is a very interesting scenario – and since the actual reversal in the pair – this will be the first time we see such a market dynamic. Ive got to stick with the fact that USD/JPY is now bullish in general so…..when risk “off” comes….a pullback in USD/JPY is expected here at some point anyway – and could catch alot of traders on the wrond side. I will likely not look to short this pair- if ever.
Mucho greetings from Australia Kong!
I’ve been watching your calls from DownUnder recently – very impressed so far.
Would appreciate your thoughts re AUDJPY. I too am thinking there’s a big risk-off scenario just around the corner & looking to short several pairs, including AUDUSD in a big way, and with it AUDJPY gonna get smashed (maybe after it touches the 100 mark).
Looking at the matrix of AUDUSD, USDJPY & AUDJPY, I see one of two scenarios has to develop from here:
1. The Yen carry-trade / risk-correlation is now defunct, or
2. AUDJPY gets hammered along with AUDUSD & USDJPY too.
Interested in your thoughts on this.
ps you are lucky to be a such a great place – I learned to dive off Cozumel years ago, and have fond memories of Playa del Carmen from several visits there.
Right on DK – I too am diving here and it is a fantastic little place for sure.
Obviously in any “risk off” scenario AUD will be hit hard so I too will look to short these – when the time arrives.The commods vs JPY move fast n furious so there should be some great profits there.
I don’t think the Carry Trade is defunct in that – we’ve all finally got some confirmation that JPY will likely take up permanent residence as the lowest yielder ( for some time traders where concerned as to which – the USD or JPY )but now Im positive US will need to raise rates before Japan ever does. Will AUD lower rates in the future? Is the rate differencial still large enough for big money to keep the trade? I can’t say for sure but will continue poking around.
AUD/JPY will get hammered for sure, but I really don’t think we will see as large moves in USD/JPY – but considering the massive up turn in all JPY pairs – the “counter trend rally” should be seen well in most.
I want to get this timed as accurately as I can and take advantage of it to the fullest so….will be “itching” to flip the switch short. I’m already antsy about so – will just keep with the short term tech / fundies – and we will know – when we know!