USDJPY; Zen and the art of economic cycle maintenance
Updated
The Yen and thus, the Bank of Japan, is in a rather precarious position.
(Then again, when was the last time they weren't - in a precarious position?? ... .)
Admittedly, our Japanese is somewhat rusty lately but nowhere in the monetary manual did we find where it says: "Lending rates must be fixed at <0% or >10%, at all times!"
So, when the BoJ hangs it's hat on some arbitrary metric, such as the volatility in the USDJPY in this case, to guide it's policy and a potential departure from the negative interest rates (more so than based on the underlying economic data - CPI, PPI, unemployment, etc.) and then said volatility collapses, almost immediately?! ... One could only speculate on the complex range of emotions, induced in the BoJ's leadership (WTF?!, etc.). So,now what? ...
These previously unlikely turn of events suddenly provide a strong bias towards a (top-side) volatility spike, in the event of which a forced monetary intervention by the BoJ in the very near future becomes a virtually foregone conclusion!
On an additional note; Given the current US-Japanese rate differentials (as well as other factors) the USDJPY remains the least "over valued" among all the Yen crosses - making it a less than ideal such metric. Try on the CHFJPY or even the EURJPY as an exercise in absurd over valuation, for example. The likes of which have solid, almost identical, precedents in the late 1970 European central bank policies, most ending "in tears" and none more than Switzerland's SNB's, which slid into one of it's deepest depressions by the beginning of the 1980s!
This weeks technical picture (including Fridays close) further underlines this, by now much shifted, bias toward a top-side break out, potentially pushing prices well past the key 150.00 level, rather quickly. (E.g., certainly do Not be short the USDJPY, here! - To say the least.)
Current Rate Differentials between the Bank of Japan and ...
--------------------------------------------------------------------------------
- in Basis Points - ("most over valued" ranking)
- CHFJPY (Switerland) --- +250 - (#1)
- SKJPY (Sweden) --- +375
- AUDJPY (Australia) --- +400
- NOKJPY (Norway) --- +400
- EURJPY (EU) --- +450 - (#5)
- CADJPY (Canada) --- +475
- GBPJPY (G. Britain) --- +515
- NZDJPY (N Zealand) --- +525
- USDJPY (US) --- +525
- MXNJPY (Mexico) --- +11.25 - (#4)
- ZARJPY (S. Africa) --- +11.75 - (#2)
- HUFJPY (Hungary) --- +13.00 - (#3)
---------------------------------------------------------------------
p.s. This here is also the new Yen Thread!/b]
(Then again, when was the last time they weren't - in a precarious position?? ... .)
Admittedly, our Japanese is somewhat rusty lately but nowhere in the monetary manual did we find where it says: "Lending rates must be fixed at <0% or >10%, at all times!"
So, when the BoJ hangs it's hat on some arbitrary metric, such as the volatility in the USDJPY in this case, to guide it's policy and a potential departure from the negative interest rates (more so than based on the underlying economic data - CPI, PPI, unemployment, etc.) and then said volatility collapses, almost immediately?! ... One could only speculate on the complex range of emotions, induced in the BoJ's leadership (WTF?!, etc.). So,now what? ...
These previously unlikely turn of events suddenly provide a strong bias towards a (top-side) volatility spike, in the event of which a forced monetary intervention by the BoJ in the very near future becomes a virtually foregone conclusion!
On an additional note; Given the current US-Japanese rate differentials (as well as other factors) the USDJPY remains the least "over valued" among all the Yen crosses - making it a less than ideal such metric. Try on the CHFJPY or even the EURJPY as an exercise in absurd over valuation, for example. The likes of which have solid, almost identical, precedents in the late 1970 European central bank policies, most ending "in tears" and none more than Switzerland's SNB's, which slid into one of it's deepest depressions by the beginning of the 1980s!
This weeks technical picture (including Fridays close) further underlines this, by now much shifted, bias toward a top-side break out, potentially pushing prices well past the key 150.00 level, rather quickly. (E.g., certainly do Not be short the USDJPY, here! - To say the least.)
Current Rate Differentials between the Bank of Japan and ...
--------------------------------------------------------------------------------
- in Basis Points - ("most over valued" ranking)
- CHFJPY (Switerland) --- +250 - (#1)
- SKJPY (Sweden) --- +375
- AUDJPY (Australia) --- +400
- NOKJPY (Norway) --- +400
- EURJPY (EU) --- +450 - (#5)
- CADJPY (Canada) --- +475
- GBPJPY (G. Britain) --- +515
- NZDJPY (N Zealand) --- +525
- USDJPY (US) --- +525
- MXNJPY (Mexico) --- +11.25 - (#4)
- ZARJPY (S. Africa) --- +11.75 - (#2)
- HUFJPY (Hungary) --- +13.00 - (#3)
---------------------------------------------------------------------
p.s. This here is also the new Yen Thread!/b]
Note
Just a summary of the need-to-knows about the BoJ's policy + Yen volatility, etc.Trade active
USDJPY - SHORT; All the speculation about "Yen intervention" is abject nonsense!
The USDJPY simply hit the technically significant 88% retracement of the A-B leg of that massive 'Bat' on the weekly chart. E.g., 149.14 is(was) the self evident Short Entry! SHORT -> Target: 110.00
p.s. Incidentally, everyone upon seeing 150.00 breached and then, following the first wobble, thought "it's an intervention!" and started dumping the USD, sans BoJ! Talk about a self-fulfilling prophecy ;-) But that's how/why technically significant turning points are effective. People make up stories, in retrospect, once the inevitable occurs, as in this case. (The BoJ was more surprised than most out there; Especially after the $4.8 billion in barrier options they have just put in place between 151.50 - 152.50, last week. ;-)
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