ridethepig | JPY Long-Term Macro Map
Updated
The elements of Macro strategy
📍 On the JPY side...
It is well known the vulnerability of Japanese corporates in this environment, they are particularly exposed because of the demographics and sector exposures. Restaurants, bars, entertainment etc all are looking very feeble, and with credibility seems to be fading on the monetary and fiscal side too since the latest rounds of stimulus there is room for a massive leg lower in JPY. For those following the conversations on Japanese fiscal bazooka, the sizes are insane... Abe just put through another 6% of GDP and raised the overdraft to +/- 15% of GDP. A comatose recovery is underway, even if the fiscal execution is flawless this will take years to recovery.
📍 On the USD side...
Hedging will become a lot lot cheaper with Fed zero rates meaning that the demand for USD will increase as it remains a more attractive hedging instrument than JPY. So we have the following picture: the king stuck in retreat via Covid forcing the front end of the yield curve to stay anchored to rates, while the belly and long end are starting to dislocate and tick higher. This is screaming of longer lasting pain to come. Local politics will provide some ebb and flow although Trump looks a done deal. The only caveat is if Hillary throws her hat in the ring, low odds as per today but of course this will be one to keep an eye on and Biden dependent.
📍For the technical flows...
We are tracking an ABC sequence with the 'C' leg in play after this weekly close. The 151 remains the main target in the sequence with a time horizon of Q4 21 / Q1 22. The monthly chart is a little out of scope for retail trading, instead it will serve as a compass to help our Weekly, Daily and H4 maps.
A round of Macro Maps will be uploaded over the weekend. As usual jump in with charts, views, questions or etc and thanks for keeping the support rolling with likes, comments and etc!
📍 On the JPY side...
It is well known the vulnerability of Japanese corporates in this environment, they are particularly exposed because of the demographics and sector exposures. Restaurants, bars, entertainment etc all are looking very feeble, and with credibility seems to be fading on the monetary and fiscal side too since the latest rounds of stimulus there is room for a massive leg lower in JPY. For those following the conversations on Japanese fiscal bazooka, the sizes are insane... Abe just put through another 6% of GDP and raised the overdraft to +/- 15% of GDP. A comatose recovery is underway, even if the fiscal execution is flawless this will take years to recovery.
📍 On the USD side...
Hedging will become a lot lot cheaper with Fed zero rates meaning that the demand for USD will increase as it remains a more attractive hedging instrument than JPY. So we have the following picture: the king stuck in retreat via Covid forcing the front end of the yield curve to stay anchored to rates, while the belly and long end are starting to dislocate and tick higher. This is screaming of longer lasting pain to come. Local politics will provide some ebb and flow although Trump looks a done deal. The only caveat is if Hillary throws her hat in the ring, low odds as per today but of course this will be one to keep an eye on and Biden dependent.
📍For the technical flows...
We are tracking an ABC sequence with the 'C' leg in play after this weekly close. The 151 remains the main target in the sequence with a time horizon of Q4 21 / Q1 22. The monthly chart is a little out of scope for retail trading, instead it will serve as a compass to help our Weekly, Daily and H4 maps.
A round of Macro Maps will be uploaded over the weekend. As usual jump in with charts, views, questions or etc and thanks for keeping the support rolling with likes, comments and etc!
Note
The attentive readers will have been asking how can USD devalue if USDJPY is marching towards the 150 outpost; but this is a race to the bottom! This is a good ploy in such a restricted monetary environment.Note
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