The end of an era.This week, the Bank of Japan governor’s Kuroda’s decade long term comes to an end. As such we would like to take some time to review what this means for the Yen and in particular, the AUDJPY.
Firstly, central bank timings. In case you missed it, last Tuesday the Reserve Bank of Australia (RBA) snapped its consecutive 10 rate hikes, being the second major central bank in developed markets to pause after the Bank of Canada. On the other hand, the Bank of Japan’s (BOJ) inaction thus far, is in stark contrast to the rest of the world.
Kuroda officially ends his second 5-year term. With the new Governor Ueda at the helm, we think a move away from the current policy stance is very likely for BOJ as inflation remains uncharacteristically high for Japan and unemployment still relatively contained.
A shift in the BOJ’s policies could mean the end of the largely debatable Yield Curve Control (YCC) policies, either in the form of abandonment or yet another change to the policy band or target yield as it repeatedly trades close to the upper limit of the currently allowed range.
In fact, the OIS Implied rates for the 10-year Japanese gov yields show a huge disparity from the BOJ’s policy ceiling of 0.5%. While it has corrected from the high, it still trades north of the 0.5% cap by a clear margin, indicating market participants’ expectations that the yield cap is likely to be abandoned or shifted higher again.
Coincidentally, the BOJ can take a page out of the RBA’s book, where RBA faced an almost identical situation, when in 2021 it was forced to abandon its three-year yield target.
Once it lost control, yield quickly shot up there after. If or when the BOJ lose control of its YCC program, this warrants a peek into what might happen to Japanese Yields.
Market expectations of forward rates are completely opposite for these two countries, with participants expecting the RBA to execute multiple rates cut through 2023, while Japan is expected to hike rates.
So what does this mean for the currency pair?
Well one way to look at this is the real yield differential between Japan (JP) and Australia (AU). When the AU – JP yield differential collapses, the AUDJPY tends to follow suit. If RBA is to hold rates, while the BOJ is to raise, we could see this yield differential collapse from here, paving the path for the next downward move in the currency pair.
On the technical front, the AUDJPY is trading near its upper resistance of a four decade long descending triangle. On a daily timeframe, although the pair's first attempt to break below the 88 handle was short-lived, it now sits just above this support, which could lead to a second coming.
Of course, such a trade might take a while to play out given the decade long chart pattern as well as fundamental factors such as central banks’ policy shifts. Looking ahead, the next potential catalyst could be the Bank of Japan’s first meeting under a new leadership on the 27/28th of April, while the RBA’s next meeting is scheduled for 2nd of May.
To express this view, one option is to use the CME AUDJPY currency pair, which allows you to short the currency pair directly. Alternatively, if liquidity and contract size are of concern, the same view can be expressed by selling one Micro USDJPY Futures and buying two Micro AUDUSD Futures to construct a synthetic AUDJPY pair. Setting up the AUDJPY currency pair this way allows a more palatable trade as the notional amount is on roughly 20,000 AUD or 10,000 USD. This synthetic set-up allows us to access a more liquid market in both contracts compared with the full sized one. Using the descending triangle structure as a guide, we set our stops at 94, close to the previous resistance and our take profit at 70.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
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The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
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Kuroda
USD/JPY - yen slips after BoJ maintains policy settings The Japanese yen is trading at 1.36.83 in the European session, down 0.52%. USD/JPY fell 0.90% on Thursday but has recovered much of those losses today.
Bank of Japan Governor Kuroda didn't fire any final shots at his final meeting today. The BoJ maintained interest rates at -0.1%, where they have been pegged since 2016, and didn't make any changes to its to yield curve control (YCC) policy. Traditionally, BoJ governors do not make waves at their final meeting, but there was an outside chance that Kuroda might buck the trend. Kuroda has surprised the markets in the past, most notably when he widened the yield curve band in December and jolted the markets. This time, Kuroda stayed on the sidelines and the yen responded with losses as some investors were disappointed that he didn't tweak the YCC.
Kazuo Ueda takes over as BoJ Governor next month, and there is growing speculation that Ueda will change forward guidance and tweak or even abandon YCC, as distortions in the yield curve are damaging the bond markets. Ueda may not press the trigger when he chairs his first meeting in April but is expected to shift policy in the coming months.
The US releases its February employment report, highlighted by nonfarm payrolls, later today. The blowout January reading of 517,000 is widely seen as a blip, although the labour market remains surprisingly resilient, despite the bite of rising interest rates. The estimate for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar. A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed's hawkish stance and should be bullish for the greenback.
The Fed will also be keeping a close eye on wage growth, in addition to nonfarm payrolls. Average hourly earnings are expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. Higher wages drive inflation higher and an acceleration in wage growth would complicate the Fed's battle to curb inflation.
136.06 is under pressure in support. 13502 is next
136.86 and 1.37.90 are the next resistance lines
USDJPY Outlook 9th March 2023Although the USDJPY traded significantly higher following the bullish news from the US Federal Reserve, with the price reaching the 138-round number resistance level, it has since retraced significantly to the downside and is trading below the 137-round number level.
With the short term bearish trendline indicating downward pressure, look for the USDJPY to continue trading lower to retest the 136.40 (and 61.8% Fibonacci retracement level), similar to the price action overnight.
However, watchout for significant price volatility tomorrow with the Bank of Japan (BoJ) due to release its monetary policy decision (and it is also Governor Kuroda's last meeting).
While it is unlikely that any changes will be made to the monetary policy, the market is anticipating the potential of a surprise since it is Kuroda's last meeting.
If he adjusts/removes limits on the JGB yield, the Yen could strengthen significantly, with the next key support level for the USDJPY at 135.26.
USD/JPY dips as Tokyo Core CPI slowsThe Japanese yen has gained ground on Friday. In the European session, USD/JPY is trading at 136.17, down 0.44%.
There was some positive news on the inflation front, as Tokyo Core CPI for February slowed for the first time since January 2022. The indicator was expected to rise from 4.3% to 4.5%, but instead reversed directions and fell to 3.3%. The sharp drop was not a complete surprise, as it was driven by government subsidies, including a 20% reduction in household electricity bills, which took effect in February. Without the subsidies, it's likely that the Tokyo inflation figure would have come in around 4.5%.
It's unclear how long the government will continue these subsidies, which means that the inflation picture remains uncertain. The Bank of Japan has insisted that rising inflation is transient and is a result of external factors such as high commodity prices rather than domestic inflationary pressures. The central bank has insisted on maintaining its massive stimulus programme even though inflation has been on the upswing and is more than double the BoJ's target of 2%.
All eyes are on the Bank of Japan, as the changing of the guard looms ever closer. BoJ Governor-elect Kazuo Ueda will take over the helm from Haruhiko Kuroda in early April. Ueda has been careful not to make any waves at his confirmation hearings, saying that the central bank's current policy is appropriate. Still, the markets aren't convinced that Ueda will maintain Kuroda's ultra-loose policy, especially with rising inflation. The BoJ's yield curve control (YCC) policy has damaged the bond markets and there is speculation that Kuroda could make a grand exit at his final meeting on March 10 and tweak YCC in order to relieve pressure on Ueda.
There is resistance at 137.37 and 138.24
135.65 and 134.78 are providing support
Yen edges lower after BoJ's Ueda testimonyThe Japanese yen is slightly weaker on Friday. In the European session, USD/JPY is trading just above the 135 line.
Incoming Bank of Japan Governor Kazuo Ueda appeared at a parliamentary hearing on Friday and the markets were all ears. The buzz-word from Ueda was 'continuity', which really wasn't a surprise. Ueda has already said that the current policy is appropriate and he maintained this stance at the hearing. Ueda said that ultra-low rates are needed while the economy is fragile and ruled out fighting inflation by tightening policy.
With inflation running at 4%, above the BoJ's target of 2%, there is pressure on Ueda to abandon or at least adjust the Bank's yield control policy (YCC), which is being criticised for distorting market functions. Ueda treated this hot potato with caution. He acknowledged that the YCC had caused side effects but said that the BoJ should evaluate whether recent steps such as widening the band around the yield target would ease these problems.
The takeaway from Ueda's testimony is that he is in no hurry to shift central bank policy. Still, there is strong pressure on Ueda to address YCC, which is damaging the bond markets. Investors should not discount the possibility that Governor Kuroda could widen the target yield band at the March meeting in order to relieve pressure on Ueda. If Kuroda doesn't act, the bond markets could respond with massive selling before Ueda takes the helm of the BoJ in April.
The inflation pressures facing the BOJ were underscored by National Core CPI for January, which rose from 4.0% to 4.2%. This was just shy of the 4.3% estimate, but still the highest reading since 1981. The BoJ has insisted that inflation is temporary (remember that line from the ECB and the Fed?), and is hoping that the government's massive stimulus package, which includes subsidies for electricity, will help bring down inflation.
USD/JPY is testing resistance at 134.85. Above, there is resistance at 135.75
1.3350 and 131.90 are providing support
Yen jumps on report of BoJ appointmentIt has been a busy day for the Japanese yen, which jumped as much as 1.1% today before paring most of those gains. In the European session, USD/JPY is trading at 131.04, down 0.37%.
The Japanese yen posted sharp gains after a Nikkei report that Kazua Ueda would be selected as the Bank of Japan's next governor. Ueda is a former member of BoJ's policy board and will replace Haruhiko Kuroda in early April. The yen's gains, although only lasting a short time, indicate that Ueda is expected to take a more hawkish stance than Kuroda, who was the architect of an ultra-loose monetary policy that has largely remained in place even while other major banks have been hiking rates to tackle inflation.
The question of who will become the next BoJ Governor has resulted in volatility for the yen. Earlier this week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen lower for a brief time, as Amamiya is considered a dove. Amamiya declined the offer and if the latest report is accurate, things should get very interesting under the helm of the hawkish Ueda.
US unemployment claims rose for the first time in six weeks, from 183,000 to 196 thousand, which was above the consensus of 190,000. Still, this marked a fourth week of claims below the 200,000 level. The four-week moving average, which smooths out much of the week-to-week volatility, actually edged lower to 189,250. This is an indication that the labour market remains tight, despite reports of mass layoffs by Amazon, Facebook and other large companies.
USD/JPY tested support at 130.71 earlier. The next support line is 129.12
There is resistance at 132.23 and 133.27
ridethepig | JPY for the Yearly Close📌 @ridethepig G10 FX Market Commentary - JPY for the Yearly Close
Of course, the breakout here can be bought after so much consolidation but it takes time. Buyers have no worries, since with a solid centre a loose Japanese fiscal and monetary policy is easy enough to map. Even more than that Kuroda and Suga are well seasoned, the logical link here is for USDJPY lower as a safe-haven flow but my models are picking up on it dislocated from the rest of the board on a capital flow basis. We managed to clear the 2020 targets very early and it will be a pleasure to review:
...we have to be interested in how the crowd can be wrong and how they are being led into the wilderness. Japan understood clearly the issue from the centre, unlike the West which have attempted to use monetary policy to cure private debt problems with issuing more private debt. They have breathed this mantra since 1991, in this sense and others they are miles ahead of the West and had a few decades to get to work on it with fiscal policy.
We will go into the macro details in the coming days after the round of G10, EM, Commodities, Equities and Yields maps are updated. Then we can open the discussions for all to join in with the macro charts before we go into the short-term possibilities and build the shop for 2021 and beyond.
Thanks as usual for keeping the feedback coming 👍 or 👎
end of the carry trade The chart below shows when we started to switch sides in yen at 149.3x on October 18th. Three days later, we had FED 'slip of the tongue' admitting being passed the mid-point in rate cycle, and finally the dollar began to cool. BOJ have no option but to move rates higher. The clock is ticking for a move under $125, unlocking $110 and $100 with the full swing.
For those following the flows over the past few years this has been a flawless carry trade, presented in a 5-3-5 corrective sequence (since multiple decades), and finally beginning to unwind.
In terms of sequencing, Kuroda is out in April, leaving behind inflation on the doorstep and probably the end of YCC. Yen longs continue to make a lot of sense over 2023, near term watch out for some profit taking at $125.
Keep short, add on better levels, $132 will cap the highs.
Implied volatility screams higher ahead of the BOJ meetingOvernight implied volatility has risen sharply higher for yen pairs ahead of tomorrow’s Bank of Japan (BOJ) meeting. In fact, they now sit at their highest level since Brexit, which saw some yen pairs produce double-digit percentages moves (to the favour of the yen) following the infamous vote.
Why are traders on edge ahead of tomorrow’s BOJ meeting?
The BOJ surprised market in January by doubling their target band of the 10-year JGB from +/- 0.25% to +/- 0.5% ‘around’ zero. Given they had denied for months they would exactly that, it quickly led to speculation that the BOJ are now veering away from ultra-loose monetary policy, and this was just an important first step. But things are never straight forward with the BOJ as there are several moving parts for their policy, so we’ll take a look at some potential scenarios.
The BOJ could abandon YCC (yield curve control)
There is a growing expectation for the BOJ to either widen the band (to 0.75% or 1%) or scrap it all together. On one hand this is plausible as Kuroda finishes his 10-year term in April, and he may want to provide a smooth transition to his successor.
But the BOJ have already proven they don’t need a meeting to announce such a move, as we saw on the 3rd of January. And do they need to widen it so aggressively twice in the same month?
Personally I suspect the BOJ are unlikely to widen their YCC further, given the increased levels of volatility it has caused for Japan’s bond markets over the past few weeks. Furthermore, this seems to have quickly become a consensus view – and the BOJ don’t have a great record of playing along with the consensus. And this leaves the yen to a broad sell-off (stronger USD/JPY) if they keep YCC in place.
Could the BOJ raise interest rates?
I suspect this to be a very low probability event, but take nothing for granted with the BOJ. Also, it is the low probability event which spark the largest reactions, and a surprise hike to zero or higher is likely to send USD/JPY lower, along with the Nikkei 225.
But as the year progresses there’s a much greater chance that the BOJ will revert to ZIRP (zero interest rate policy), and if inflation remains elevated they could even raise rates to 0.1% or 0.2% further down the track.
Perhaps a form of QT (quantitative tightening)?
Assuming the BOJ intend to scrap YCC before Kuroda exits (but it is not announced tomorrow), a potential first step would be to limit the amount of JGB purchases in the January meeting before wrapping it up at their March meeting.
The BOJ could switch to an inflation target ‘range’
Not many are discussing this that scenario, which is partly why I like it. I don’t think the BOJ will scrap their inflation target all together, but they might announce a target range of 2-3%. We know that the PM has been calling for more flexibility with the inflation target, and this seems like a plausible compromise from the BOJ. Yet this is a scenario to plan for as it gives the BOJ greater wriggle room with their policy – so may provoke a less directional response from markets.
Overnight Implied Volatility levels for USD/JPY
At the time of writing, overnight implied volatility has risen to ~340 pips above or below 128.95, which provides a range of 125.14 to 131.84. 1-week IV is a whopping 900 pips and the 1-month has blown out to 1874. So traders are clearly taking this meeting very seriously.
It is worth noting that implied volatility is not a precise target and essentially tells us options traders estimate with ~68 probability of prices closing within the implied range. Furthermore, I have noticed a tendency for markets not to reach the suggested upper or lower bounds of the range when IV explodes like it has today. This could be because markets are now fully prepared for a large event and much of the shock factor has been priced in. Implied volatility was low ahead of the BOJ’s surprise announcement on the 4th of Jan, but much higher after the event (and the same can be said for Brexit).
With that said, it is likely to be a volatile event regardless even if not as volatile as the IV’s currently suggest. Either way, risk must be managed accordingly – even if it means not trading the actual event.
USD/JPY 4-hour chart
Prices have retraced against the bearish trend on the 4-hour chart. If prices continue to drift higher I doubt it will have the legs to reach the 130 resistance zone ahead of the meeting, but we may see further bearish interest as we get close to the meeting with expectations for a hawkish meeting remaining high.
• With several upper wick forming on the 4-hour chart then bears could consider fading into minor rallies into the highs with a loose stop, to anticipate a move lower ahead of the meeting.
• Trading around the actual announcement may prove futile given the potential for volatility and the spread blowing out.
• But once the dust has settled and traders get a clearer picture of what the BOJ have done (or not), it would be a cause of deciding if the meeting was hawkish (USD/JPY bearish) or dovish (USD/JPY bullish) relative to high expectations of the former.
Yen's gains look cappedThe end of an era
The global stock of bonds yielding sub-zero yields has been erased at the start of 2023, after peaking at US$18.4Trn in late 20201. The fight over inflation has caused central banks from the US, Europe, UK and across the world to exit their low to negative interest rate policy. Even the Bank of Japan – the world’s last dovish monetary authority- has left the sub-zero club and is inching towards normalisation.
BOJ policy shift
The Bank of Japan (BOJ) unexpectedly widened its target range for the 10-year Japanese Government Bond yields (JGB) from ±25Bps to ±50Bps at its December 20th meeting. Since then, the surge in 10-year JGB yields has caused a sharp rise of additional fixed rate and fixed amount purchases by the BOJ amounting to ¥17Trn. Market participants are speculating that BOJ will be forced to tighten policy even more in 2023.
Political pressure alongside costly intervention forced the BOJ to tweak policy
In 2022 – despite the BOJ keeping the Japanese 0–10-year curve fixed, sharply rising yields globally led the Yen to depreciate to a 24-year low, thereby stimulating Japanese net exports. This placed direct upward pressure on Japanese inflation via higher import prices. Japan was no longer able to sustain its yield curve control policy against a backdrop of ever-rising global yields because the interventions it needed to make in its government bond markets to defend the rise in JGB yields were becoming too costly. In addition, pressure from the Kishida administration due to concern about Yen’s depreciation pushing up prices and inflicting further damage on cabinet approval ratings.
Yen gains look capped as policy framework likely to be maintained for longer
The change in policy prompted the yen to appreciate to ¥130 versus the US dollar, a level last seen in early August. The Yen’s current rally marks a sharp turnaround from last year where investors were shorting the yen owing to the widening interest rate gap between the US and Japan. As illustrated below, an unwind -63%2 in net speculative short positioning helped drive the appreciation in the Yen towards the end of the year.
If the BOJ were to make additional adjustments, it could spur further Yen appreciation. However, we feel the BOJ probably wants to keep its modified framework in place for a longer time frame, especially now that Yen versus USD stands at more comfortable levels. This was evident from its announcement of expansion of JGB purchases to ensure yields stay in the new range.
Signs that current inflation isn’t sustainable
The more concerning reason is wages are failing to keep up with inflation. In November, inflation adjusted pay slide 3.8% which was far worse than October’s 1.2% drop, marking the worst reading in 8 years3. 2023 wage growth depends largely on the results of annual spring negotiations between corporate management and labour unions. We expect bigger raises in base pay this year than in 2022, however its likely to keep up with inflation as the global economy slows.
Japanese economy could avoid a recession in 2023
Japan’s inflation is likely to remain low in 2023, resulting in less need to tighten policy further. Japan is likely to avoid a recession in 2023. As it has yet to benefit from the re-opening trade that the Western economies have witnessed over the last two years. Consumption is likely to benefit from the economic re-opening and capex intentions are likely to rise on the back of pent-up demand for goods and services.
While goods exports could soften due to the global economic slowdown, services exports are poised to steadily improve throughout the year, led by inbound spending following the lifting of border controls by the Japanese government in October 2022. The government also launched a new economic stimulus package in October to tame inflation and cushion the blow from rising raw material prices which should support the economic recovery in 2023.
Factors underpinning the resilience in Japanese equity market performance
In the face of the global equity market turmoil in 2022, Japanese equities4 performance has been fairly resilient (-11% versus -20%5 for global equities). Japan generates a large portion (nearly 52.7%6) of its revenues from global markets. So, a weaker Yen supported its profit outlook thereby making Japanese exporters more competitive than global peers. In 2022, a number of companies announced increased dividend pay-out ratios as well as share buybacks, with the intention of protecting shareholder returns amidst the global market volatility. Pay-out ratios rose to 63% from 40%7 at the start of 2022.
Japanese yen dips, inflation risesUS and Japanese markets are open on Tuesday, but trading remains thin after the Christmas holiday. There are some key Japanese events on the calendar, although US releases are all tier-2 events. In the North American session, USD/JPY is trading at 133.41, up 0.44%.
There are a host of events out of Japan today. Retail sales rose for a ninth consecutive month in November, buoyed by the tourist trade after Japan opened its borders. Still, the gain of 2.6% y/y was well off the 4.4% gain in October and 4.8% in September, and below the consensus of 3.7%. Household and consumer consumption account for more than half of economic growth, so the downtrend is clearly worrying. Japan's economy contracted in Q3, as a poor global outlook, the slowdown in China and a weak yen put a squeeze on economic growth.
Inflation continues to rise in Japan, although the levels pale in comparison to what the US, the UK and the eurozone are experiencing. The Bank of Japan's preferred inflation gauge, BOJ Core PCI, accelerated for a ninth straight month in November, rising to 2.9% y/y, up from 2.8% and above the consensus of 2.7%. Last week, Japan's Core CPI rose 3.7% y/y in November, its highest level since 1981. Inflation is moving higher as firms continue to pass along higher costs to consumers, unable to absorb the rise in energy, food and raw materials. The rise in inflation hasn't budged the BoJ, with Governor Kuroda saying that inflation would fall back below the 2% target in 2023.
Kuroda stated on Monday that the widening of the yield curve band was not a prelude to an exit from the Bank's ultra-loose policy. We'll get more details of that dramatic move later today, with the release of the BoJ Summary of Opinions from last week's policy meeting. The report should make for some interesting reading.
133.62 is a weak resistance line. Above, there is resistance at 134.12
There is support at 132.80 and 131.83
Yen edges lower, Kuroda says no exit plannedWith most financial markets closed on Monday, trading will be thin. Japanese markets are open and USD/JPY has edged higher, trading at 132.82, up 0.34%.
The Bank of Japan announced a policy change last week, and the ramifications were massive for the Japanese yen, as USD/JPY jumped as much as 4.8% following the move. The BoJ widened the yield curve on long-term bonds from 0.25% to 0.50% but maintained the yield target at 0%. The tweak to the yield curve caught the markets napping, and the shocking move now has the markets buzzing as to whether the BoJ is planning further policy changes to its ultra-low monetary policy.
Investors heard from the man himself earlier today, as BoJ Governor Kuroda gave a speech where he stated that last week's move was not a prelude to withdrawing its massive stimulus programme. In fact, he said the widening of the yield curve would enhance the Bank's ultra-easy policy. Kuroda reiterated his well-worn theme that the BoJ wants to see wages rise in order to hit its 2% inflation target in a "sustainable and stable manner" and plans to continue monetary easing through yield curve control. The key question is whether the markets are buying what Kuroda is selling. Prior to last week, the markets were expecting an uneventful end to Kuroda's decade at the helm of the BoJ, which ends in April. That view has been turned upside down after the yield curve tweak, and I would expect the markets will be on guard for additional tightening moves, despite Kuroda's insistence that it is business as usual at the BoJ.
Last week wrapped up with further signs that inflation is falling in the US. The Fed's preferred inflation gauge, the PCE Price Index for November dropped to 5.5% y/y, down from 6.1%. As well, UoM inflation expectations slowed to 4.4% y/y in December, down from 4.6% a month earlier. UoM Consumer Sentiment rose to 59.7, up from 59.1, as consumers are more confident about the economy. Although there is evidence that inflation is easing, strong wage growth and a robust labour market likely mean that the Fed is unlikely to change its view that interest rates will rise above 5% before peaking.
USD/JPY is testing resistance at 132.70. Above, there is resistance at 133.62
There is support at 131.72 and 130.15
Has USDJPY gone ballistic already?It looks like USDJPY is spiraling out of control.
As government bonds 10y interest is artificially kept under a given level, and given inflation expectatios, usdjpy explodes.
BoJ is not able to stop the rise, except for some short-lived attempts. This attracts speculators for easy money, driving further up usdjpy, more inflation, more yield curve control, more printes, up usdpy, more inflation...
Despite formal statements by minister Suzuki, ot seems that nobody is able to stop this long term bull run from exploding.
150 in the crosshairs for USDJPYThe best move in FX, since 2020 was the idea of early development of the base in USDJPY, let's start with a quick chart review which really got into the heart of the matter. This update is much more about the technical configuration and how to work with an impulsive move.
Unlocked.
As is now becoming clear to many analysts, USDJPY is playing towards the 150 macro level, this is in a certain sense an impulsive leg; the C leg of an ABC correction, would bring into its own 5-3-5 majority. Fresh sellers will refrain from stepping against this train. Rightly so, because here would be the typical example of false prevention, which only manages to create new weaknesses eg from early soft sellers which will provide fuel to play against the isolated highs.
Thanks as usual for keeping your support coming with likes, comments and etc!
ridethepig | USD with the trump card!Will try to keep this one short and sweet.... a strong move from buyers here is decisive, sellers have given up their parry and have really been outplayed ... you should never be a slave to one side !!!
The tempo is clearly in favour of bulls.
The immediate threat is 114 with 118 above. Consider that above 118 there is very little in terms of resistance and will allow bulls to control all the way up till 150. A tactical fines, once thought that risk-off flows would be preventive, has been uncovered that USD is the ultimate haven and JPY is at a disadvantage.
As usual thanks for keeping the feedback coming...
EURJPY itching to resume bull trendUpdates coming here after the Jackson week
Bearish JPY and looking to play versus EUR . Actively adding here as the l/term uptrend is set to resume, we can look to target fresh highs here at 134.1x and continue to expect JPY to underperform in Q3 and Q4.
Indeed the break is signalling in advance that the direction is still up. Price action above 129 is proving interesting, the break of 'B' will define whether there is a chance of another pullback or the move is direct and imply the base has materialised.
The "unlocking" of 150 for USDJPYSequences and corrections illustrating waves
for those who are not holding any live positions from below the long-term swing is becoming increasingly expensive, invalidation is clearly defined below the 'B' at 101.4x, while taking October 2018 highs 'D' should be enough to "trip the fuse" and trigger momentum towards 125 and 149.3x
a multi-decade ABC corrective pattern is at stake; this 'C' is a pragmatic demonstration of the lust to expand with a typical 5-3-5 sequence.
Buyers had the move and played an exchange with the trap, which despite the length of the combination via covid in 2020, can be expressed in no other terms than; Buyers aiming to setup the ideal position (the cheapest tickets against sellers in an isolated ABC corrective sequence - see 2020 Macro Map ). I managed to carry out the deeply laid trap, (although Fed did refute a number of times) since Powell was finally handicapped via Jackson this week, I thought perhaps it is time for an update of my chart. Moreover, I know no other ending in which this precise swing for the "ABC" is more clearly illustrated than in what follows.
This have proceeded as expected so far; Japanisation was already in play and the key idea was Yen dislocation. That has happened up till now and was done solely via risk however with the monetary side entering into play and tapering starting in most likely November, the path has been cleared for the king (dollhair) to receive inflows.
ridethepig | JPY Market Commentary 18.12.2020📌 @ridethepig G10 FX Market Commentary 18.12.2020
What was the point in BOJ meeting overnight? Finally extensions of the handouts coming from the Japanese base, and remarkably the 103.0x was rescued via lack of conviction from macro players to chase it lower. Buyers now can play the break, undoing their opponents work and imagine the test of 105 as being important for the yearly close flows.
This iteration of dollar strength will be most visible in GBPUSD and USDJPY - choppy conditions seem appropriate. Here we are tracking this rather technical move. I am looking firstly for a move towards 105 resistance, followed by a zag to fade back towards 103.5x which is a 300 tick round trip.
Thanks as usual for keeping the feedback coming 👍 or 👎
The birth of fresh weakness📌 Here we go for the main event...
To illustrate the spillover effects between US and the rest of the board, we are going to use AUDJPY. This is absolutely going to be a long night, and of course, I wish it was over with already. Trump should, as has been emphasised several times, come out on top. What would be the significance of this move? Well, it renders the risk-off crowd totally mobile as it will be contested. To the other side, a Biden victory has somehow been taken as positive, let me point out the tax hikes that shall come back and will be really damaging.
SELL AUDJPY @ 75.00 | TP1 73.9x | SL 75.6x
Using JPY as 'defence against the dark arts' of politics tonight for multiple protection angles, in fact it puts the dark arts in the spotlight; protecting AUD outflows and JPY inflows are going to get in each other's way!
ridethepig | JPY beyond the elections🔸 USDJPY - into the elections
Sellers have the move and already played the exchange towards 100 on the initial covid chapter I. They are aiming for the ideal Yearly closing position (the frontal attack against any laggards). I managed to carry out the deeply laid plan (a serious contender for chart of the year) at the beginning and by not being as familiar as I was with the well-known rules on Tradingview. Moreover, I know no other ending in which this precise striving of inflation is more clearly illustrated than in the diagram that follows:
Inflation expectations proceed as follows: as dismal Covid data floods the wires => stimulus then becomes a big part of that story
📍 There is no amount of printing that can counter deflation.
As globalisation contracts, it creates a deflationary tsunami on the underlying capital formation. We then have to factor in bottlenecks on the supply side from lockdowns, agricultural shortages and etc which create inflationary pressures.
The key idea is that they can simply clear the way for the Suganomics/Abenomics with a different pair of Calvin Kleins and prevent the breakdown of 100 is truly the only way to save Japan, because the MT and LT outlooks look awful there.
In the more immediate term, the second covid chapter and election protection may keep JPY in demand and lower-time frame rallies will still attract selling interest. Here tracking 105.8x as resistance for another attempt of 104.1x and 100.0x before the king starts its journey. How keenly the speculators are at outguessing the demise of Japan.
Thanks as usual for keeping the feedback coming 👍or 👎
ridethepig | USDJPY Market Commentary 2020.09.12📍 JPY
Buyers are threatening to breakout. After 107 comes 110 and then 112.x. But sellers have other trump cards, for example covid.
My impression is as follows: as the dollar firms and finds a temporary floor therefore can be considered a bounce into the elections which can be somewhat double-edged. If the preconditions are met, namely if we get a continuation of Abenomics with the leadership elections, and effective parries into the Yen are restrained, then beginning the advance towards 150 may be justified.
But we should consider the development here to be EARLY/OPENING game. In light of this, we should take longs on a leash and if the market starts paying we can add more size. The technical breakout would lead to buyers occupying the flows. Equities may felt even more the heat if we see a paralysing effect via temporary USD inflows.
Thanks as usual for keeping the feedback coming 👍 or 👎
ridethepig | NZDJPY Market Commentary 2020.08.15So much for the round of chart updates...@ridethepig has been taking some time off this summer to prepare for a very busy September onwards.
📌 NZDJPY retrace swing is running out steam at the 69.9x / 70.0x highs. While risk remains in the background despite the political fairy-dust, the urge to park capital in the Yen has been maintained but for how much longer?
A dovish RBNZ has provided us with a freeing move to the 59.5x lows with a clear direction from foreign asset purchases and -ve rates coming.
=> Firstly think of the curious circumstances we are looking at when analysing the global macro outlook. The blockade set via inflation and Yields usually turns out to be a severe recession in all respects:
=> Secondly the momentum is building and confirming the likely sustainability of the NZD outflows and JPY inflows as a double whammy. Positive momentum is coughing after six weeks of chop, this all embracing struggle, is only a means to an end.
Remember the importance to strive for mobility, when your central bank confirms its lust to expand the overdraft and buy anything that moves overseas is always sending the currency in one direction. Also for those particularly interested in the region and given the divergence with positive Aussie macro data overnight, it’s no surprise to see AUDNZD continue the grind higher.
Sooner or later the NZD capitulation will show itself in NZDJPY and the leg towards 59.5x has appeared. Invalidation in the board will come via a sustained breach above 73.3x.
As usual thanks for keeping the feedback coming 👍 or 👎
ridethepig | USDJPY ST Market Flows 2020.06.12Eyes on UMich today. Sentiment remains awful out there despite how talking heads are selling re-openings to the masses. A very dovish Fed has forced Global Equities to play ball and marked a meaningful top across risk markets. VIX exploding higher after testing 🔑 25.0x support and implying the next move coming is a lot more sinister. This ST swing does not change the long-term multi-year chart in USDJPY .
Let's map a quick cheatsheet for those trading the flows today in USDJPY . Here actively looking to start adding shorts using strong resistance (108.5x) <=> soft resistance (107.5x) <=> soft support (106.6x) <=> strong support (106.0x) for reference.
Thanks as usual for keeping the likes, charts, questions and comments coming. Good luck all those trading the weekly closing range.
