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SHORT the Land of the Rising BanksSince the Bank of Japan shocked global markets in December ‘22 by widening the Yield Curve Control trading band on 10Y JGB yields from 0.25% → 0.5%, TOPIX Banks have been on a one-way surge upward. TSE:T17B index rallied +7% on the day of the policy meeting, and +25% within days thereafter. The three Japanese mega banks Mitsubishi UFG (TSE:8306, NYSE:MUFG), Sumitomo Mitsui Financial Group (TSE:8316, NYSE:8316), and Mizuho Financial Group (TSE:8411, NYSE:MFG) are hitting half-decade highs - but this is nonetheless a broad-based and nearly indiscriminate rally within the overall sector, as smaller regional banks participate in the upside. The fundamental reason for the rally is simply due to the Bank of Japan steepening the previously (and still) pancake-flat yield curve by lifting the ceiling on 10Y yields, while leaving their front-end policy rate at -0.1%. A steeper JGB yield curve “means” more favorable Net Interest Margins (NIM) for these lenders. There have been all sorts of analyst estimates and calculations of just how much of a positive boost to earnings this will be - and perhaps this will indeed come to fruition. However, the long end of the JGB curve suddenly and sharply rising can be a double-edged samurai sword- while banks may benefit from higher NIM, they are also taking massive unrealized marked-to-market losses on those very JGB holdings. Meanwhile, the Bank of Japan has kept firm on YCC at their latest January policy meeting. Furthermore, they have been targeting much of their JGB buying (ex the 10Y) at the 2Y ~ 5Y tenors, and JGB 2Y and 5Y yields have been cut in half from recent peaks as a result. TOPIX Banks index, especially Mizuho shares, have been closely correlated to the 5Y JGB yield - particularly since the December 2022 BOJ surprise rally. Yet, while these banks shares’ rallies have paused, they have not followed 5Y JGB yields downward. The BOJ has (for now) put a halt on an ever-rising / steepening JGB curve- giving banks +25bps (and falling as of this writing) “extra” on the long end for their NIM spread. Also with BOJ policy, there is still a negative policy rate imposed upon these banks. Earnings for these banks are coming up next week, starting at the beginning of February. There is a LOT of assumed lofty upside of NIM currently priced into these shares. If they don’t at least MEET these expectations (and according to Bloomberg articles, it seems the executives of the big three are less excited than markets are of earnings upside), swift profit taking can ensue. If they not only fail to meet lofty expectations, but instead report major unrealized losses on their JGB holdings (after taking huge losses on their foreign bond holdings throughout 2022), swift profit taking can ensue. If swift profit taking ensues, (other/additional) swift profit taking can ensue. Japan - “land of the rising yields” is now in reversal - with a major dislocation in the otherwise historically lockstep bank shares vs JGB yields. A fundamental reality check from earnings may be what it takes to whack shares back into place. Note - this is obviously not trading advice - and as I always repeat in my videos: If you listen to me, you will lose all your money. If you use me as a reverse indicator, you will still somehow lose all your money. And the reason is very simple: I am a very stupid person, and these are very stupid thoughts. Clear? So, with that said, here’s what I have been doing (and again, if you wish to apply any of it, please do so if you hate money). I had been long MUFG since Dec BOJ Meeting to ride the momentum, and closed out my long on Mon Jan 16th (day before Jan BOJ) for a +21% return in something like 15 trading days - and closed out the trade on the thesis of “no change for Jan BOJ meeting” - which then came to fruition, and MUFG fell -5% thereafter. I am using my gains (“house money”) and am now long puts on these banks with post earnings expiry. Of the three mega banks, I hate Mizuho Financial Group (TSE:8411, NYSE:MFG) the most. And I am FAR from any sort of financial analyst - I am basing this on the JGB 5Y correlation, as well as Mizuho ATM machines having eaten my ATM card TWICE ← prob little to do with stock price action.
TSE:T17BShort
by acrossthespread
USDJPY Lodged around Confluence holds key to future directionUSDJPY has been on a bearish trend in the last 2 months following the BoJ’s policy intervention sometime in November. In recent weeks, the central bank held its monetary policy meeting and still left its policy approach unchanged, leaving the yen again exposed to market forces to determine its direction. A technical view on the pair shows price is subdued by a descending trendline which aligns with a resistance around 131.550. It is important for traders to observe the price action around this zone before scaling into the market. Our possible market scenarios are Bullish Scenario: A convincing break away from the confluence around 131.550 will expose 134.65 peak with sights of the major resistance at 138.100. Bearish Scenario: Our current view shows the market trend has switched to bearish and is respectfully playing along with price swings. Current price action shows price is struggling at the confluence (131.550) and we are beginning to see some bearish candlestick patterns congest the area. Traders can look out for confirmations around this zone to ride along with the current trend. Intraday Price levels: Resistance: 131.550 Support: 127.300 Chart pattern: Wedge pattern identified on a 4hour time frame
by ScopeMarkets
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 👎
Long
by ridethepig
14
SWING TRADING: LONG USDJPY. TARGET 131.650TRADE TYPE: INSTANT ENTRY TRADE DIRECTION:LONG TIMEFRAME: 4H ENTRY PRICE: 129.000 STOP LOSS: 127.670 TAKE PROFIT: 131.650 RISK TO REWARD: >1:1 ANALYSIS: Price broke the supply zone comfortably and now shall look to aim towards the upcoming supply zone . stop loss ideally placed below swing low. Follow this thread for any future updates regarding this specific trade. CAUTION: Trading is a Probability Game and could wipe out your account if risk management and strategy is not followed properly. Cheers
Long
by FX618Analysis
Joe Gun2Head Trade - GBPJPY to reverse overnight gains?Trade Idea: Selling GBPJPY Reasoning: GBPJPY rallied to a 78.6% Fibonacci level and the 20Day Volume point of control. Entry Level: 160.01 Take Profit Level: 156.78 Stop Loss: 156.78 Risk/Reward: 2.5:1 Disclaimer – Signal Centre. Please be reminded – you alone are responsible for your trading – both gains and losses. There is a very high degree of risk involved in trading. The technical analysis , like all indicators, strategies, columns, articles and other features accessible on/though this site is for informational purposes only and should not be construed as investment advice by you. Your use of the technical analysis , as would also your use of all mentioned indicators, strategies, columns, articles and all other features, is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness (including suitability) of the information. You should assess the risk of any trade with your financial adviser and make your own independent decision(s) regarding any tradable products which may be the subject matter of the technical analysis or any of the said indicators, strategies, columns, articles and all other features.
Short
by Signal_Centre
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.
Short
by ridethepig
10
BoJ watch - a traders' guide to JPY moves on the day As detailed in the BoJ meeting preview yesterday, the market is on edge for significant movement – case in point, USDJPY 1-day implied volatility (vol) currently sits at 49% - for context, this equates to a 279-pip move (higher or lower) on the day (with a 68% level of confidence), where the market feels fairly confident the upside should be contained into 131.00. You can see the implied volatility (vol) matrix, which uses 1-day option implied volatility, and we assess the expected move derived from this vol – essentially, it replicates the straddle breakeven move, which is what options traders use as a quantitative guide for movement, which they can then buy and sell vol accordingly. As a spot FX trader, I can use this to understand expected movement over a set period, which can dictate the market regime I trade in intraday – it also helps guide my position size and whether I even hold positions at all over news. When we see vols so incredibly high, it would be a surprise if this meeting proved to be a non-event, which is a debate I’ve been having with clients – the question for me is what scenario is 1) most likely 2) what is the ‘pain trade’? I list the expected policy measures below which have been widely touted as the most likely responses to be seen today. My own view is the BoJ YCC (yield curve control) program is on borrowed time – there is rising political pressure against it, the market is forcing the BoJ to buy unsustainable levels of bonds daily and Japan has a rising inflation problem that is seeing the fair value of JGB’s yield rise. My own view is the most likely action is that we see no. 1 enacted, with the YCC band rising to 1%, subsequently giving them more time to fully abolish YCC in the months ahead. However, I acknowledge the chance of no. 5 or 6 is also high. The big moves in the JPY, JPN225 and JGBs come if we see no.4 or 6, with no. 5 also offering big potential movement. The pain trade is likely seen in no.6 (no change at all) – given expectations, positioning (the market is heavily short JGBs and long JPY), and options traders short delta exposure – if that plays out the JPY could get smoked. Recall, the main policy shifts we could see are: 1. To widen the current 10-year JGB cap again, to 0.75% or 1% from 0.5% 2. To shift the target JGB yield from the 10-year JGB to the 5-year JGB. 3. To raise the 10-year yield target to 0.1% from 0% currently 4. To terminate and close off the YCC program completely 5. To terminate the YCC adding a temporary QQE program and a commitment to provide two-way liquidity 6. To leave the policy unchanged So, for those involved today keep your eyes peeled for headlines from 12 pm – it could get a little crazy. After pegging the JGB market for seven years, we typically get vol when we move away from a well-trodden regime.
by Pepperstone
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.
by CityIndex
USD/JPY ends nasty slideUSD/JPY is in positive territory on Monday. In the North American session, USD/JPY is trading at 128.50, up 0.52%. The yen had an excellent week, climbing over 3% and trading at levels not seen since May 2022. The Bank of Japan holds a two-day policy meeting on Tuesday and Wednesday in what could be one of the highlights of the week. BOJ meetings were traditionally sleepy affairs that usually maintained the Bank's policy settings. That has changed and the December meeting roiled the markets after the BoJ unexpectedly widened the band around 10-year JBs to 0.50%, up from 0.25%. The dramatic move has raised speculation that the BOJ could be planning additional policy changes at the upcoming meeting. The 0.25% cap on 10-year yields was breached on Friday and again today. The central bank has responded by buying over 2 trillion yen worth of JGBs but there is talk that the Bank could further widen the band to 0.75% or even abandon its yield curve control (YCC) policy completely. The yen has gained 14% against the US dollar since November, adding pressure on the BoJ to tighten its ultra-loose policy. If the BOJ does scrap the YCC, it would likely be viewed by the market as similar to a rate hike, which would push the yen higher. The BOJ will also release an updated inflation forecast, which is expected to be revised upwards. Market participants should be prepared for volatility from the yen after the BOJ announcements on Wednesday. In the US, consumer confidence gained strength in December. UoM Consumer Sentiment jumped to 64.6, beating the forecast of 60.5 and above the November reading of 59.7. Inflation expectations for 2023 decreased to 4.0%, down from 4.4%, although long-term expectations inched higher. USD/JPY is testing resistance at 128.40. Above, there is resistance at 129.40 127.07 and 125.92 are providing support
by OANDA
The BoJ meeting playbook - navigating big moves in the JPYIt’s been many years since Bank of Japan (BoJ) meetings posed significant risks for traders, but this Wednesday’s BoJ meeting holds the potential for significant volatility in USDJPY, as well as the JPY crosses, and JPN225. The risk manager The job of the trader is to manage risk, as well as achieving correct position sizing for every trade. So, when I look at the explosion in USDJPY 1-week (options) implied volatility – essentially the markets' expectation of movement in USDJPY through the week – we see this at 23%, and the highest levels since March 2020. For context, this equates to expectations of around 350 pips, or a near 3% move this week in USDJPY (higher or lower). Much of this move could be realised on the day from headlines from the BoJ meeting and what the market hears relative to positioning and expectations. When we see such high expectations of movement, the question traders need to ask is whether they should reduce or even exit exposures before the event. In some cases when there is a strong skew in the potential outcomes and a high enough conviction, whether to even take a position over the event – in special situations these events can offer high/risk reward outcomes. We assess that here. Key times to be aware of – Headlines and the outcome from the meeting will come out on Wednesday, likely in the Asia session afternoon. Unlike most data points there is no set time, but we should hear the outcome between 13:00 and 15:00 AEDT. What is expected from the BoJ? Last week we saw an article in the Japanese publication Yomiuri Shimbun that the BoJ was reviewing the negative effects of its current monetary policy regime – despite only changing its policy setting on 20 December, where they lifted the ceiling (or cap) by which the 10yr JGB yield (Japanese govt bond) can trade to 0.50%, the market swiftly took this to mean another key change was incoming. The fact the BoJ had to ramp up its daily bond buying to a record amount to defend the 0.50% cap, suggests their policy setting is still highly dysfunctional, and with inflation pushing 4% its current yield curve control (YCC) program is on borrowed time. While we can look at the possible outcomes, and assign a probability and potential market reaction, I think in all cases the BoJ will try its utmost to say the action is designed to address an increasingly dysfunctional market and should not be seen as a tightening of policy. The market will likely look through this and ignore their pleas. Given 10yr JGBs currently trade above 0.5% (or 50bp), 10yr swap rates trade above 90bp and the JPY has had a one-way move of late, one assumes the market is skewed and part positioned to an outcome that the BoJ abolish its YCC program. This plays into my back-of-the-envelope playbook. Possible actions: • The BoJ again widens the yield band to -/+0.75% while continuing to buy incredible amounts of JGBs in its daily operations to support the 0.75% yield cap - an action that doesn’t make a huge amount of sense as it would not resolve the dysfunctional market and would need to be altered again – likely promotes a 2%+ rally on the day in USDJPY • The BoJ widens the yield band out to -/+1% while continuing to buy JGBs to support the cap – tactically this makes more sense, but an action that could cause a 1%+ rally in USDJPY • The BoJ leave policy unchanged but signals a change is coming – this would surprise and cause a 2.5%+ rally on the day in USDJPY • Completely terminates its YCC program – the market is leaning this way but would still likely cause a 3%+ sell-off on the day in USDJPY • Shifts the YCC target which is currently capping 10yr JGBs at 0.50% and move to target the 5yr JGB instead – it's hard to create a clear framework on this policy change, but an action that likely leads to the most subdued reaction seen in USDJPY For those new to BoJ policy and bond markets this event risk does require some research. As always, moves in markets come from current market positioning, expectations, and the actual outcome. For me, simplistically, given expectations are now elevated for an end to YCC and its yield cap – hence, a lack of action would be a big surprise and cause a significant move higher in USDJPY. If the BoJ decides to remove its YCC cap, then despite positioning I think there is further to go, and it could have huge implications for the JPY and see USDJPY smashed as traders front-run the idea of massive capital repatriation from Japanese pension funds eyeing more compelling returns in their domestic bond markets. The BoJ meeting holds the potential for bug moves not just in the JPY and JPN225 but could influence the USD across other G10 pairs too – be aware of the event and manage the risks accordingly.
by Pepperstone
2
WHAT HAPPENED WITH JPY?Hello guys! Here is a quick summary of what happened in the market today, especially in the Japanese one, after the Bank of Japan surprised everyone. On Tuesday, the Bank of Japan made its first move towards a shift away from ultra-loose monetary policy after weeks of speculation. As part of an adjustment to its yield curve control policy, the BoJ decided to increase the range of its target for the yield on 10-year government bonds from +/- 25 basis points to +/- 50 basis points. Despite this change, the Bank kept its short-term policy rate at -0.1% and maintained its commitment to easing in its statement. In fact, the BoJ plans to increase its purchases of Japanese government bonds in the coming quarter, from 7.3 trillion yen per month to 9 trillion yen. The Bank of Japan's policy adjustment was more hawkish than financial markets had anticipated, and contributed to the yen's further recovery from a 30-year low reached this October. A stronger yen may provide some relief to the Japanese economy, which has been grappling with the high cost of imports due to the sharp decline in the value of the yen this year. As the possibility of more hawkish central bank actions and a potential recession in 2023 increased, the value of Asian currencies against the US dollar decreased further and risk appetite remained low. While the US dollar strengthened against most Asian currencies, the strength of the yen, euro, and pound weighed on the dollar index and dollar index futures. What do you think about the BoJ's move? FX:USDJPY FX:USDJPY BMFBOVESPA:JPY1! PEPPERSTONE:JPYX
Short
by m_maia14
4
Japanese yen edges lowerThe Japanese yen continues to have a quiet week. USD/JPY has edged up 0.20% and is trading at 132.50. There is optimism in the air ahead of the US inflation report for December. The forecast is for inflation to fall, which is exactly what investors want to hear. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. We've seen in recent months how inflation reports can move the equity and currency markets and investors should be prepared for the same from tomorrow's inflation report. Soft inflation releases have sent the US dollar lower, as the markets have assumed that the Fed will ease up on the pace of rates and even cuts rates late in the year. The Fed continues to present a hawkish stance, but the markets will likely march to their own tune if inflation comes in as expected or drops even lower. The markets have priced in a peak fed funds rate of 4.93%, lower than the Fed dot plot which projects rates peaking at 5-5.25%. Some Fed members have said rates could go even higher than that, but that hasn't made much impression on the markets. The Bank of Japan meets next week, and investors will be watching carefully. The BoJ meetings are no longer sleepy affairs with little substance, as the markets saw in December when the BoJ stunned the markets by widening the yield curve control band. We're unlikely to get more fireworks at the upcoming meeting, but the BoJ's inflation forecasts will be significant. There have been reports that the BoJ may raise the forecasts for core inflation. This would be bullish for the yen as a higher inflation forecast would be a prerequisite for the BoJ normalizing policy. There is weak resistance at 132.13, followed by 133.30 131.25 and 130.60 are the next support lines
by OANDA
Is the Yen rally over?The truth is that I don't know if it's over or not. It certainly feels like the USDJPY pair is going a lot lower, given that the Fed is very close to pausing and cutting rates in 2023. Deflation has always benefited the Yen, which might be the case again. The BoJ took the best stance of all central banks, as they held rates low and provided liquidity when the global economy was slowing down and would very clearly go into a deep recession in 2023-2024. Eventually, rates elsewhere will go down, but rates in Japan will be pretty much the same (go down a lot less). Therefore, the JPY could outperform everyone else. However, there is a chance that USDJPY is about to bottom. It's very close to testing a key area; I think it will sweep the double bottom and bottom at the S3 monthly pivot. If there is going to be a bottom soon, that's where I expect it to be. If the USD is to bounce quickly, that's where I expect it. It feels too early for the dollar to collapse outright, and maybe we will get a mini inflation scare before we move properly into deflation. So this is my bullish scenario. Fall slightly below 130 and then slowly go back up. 135.8 is the first target, and if 138 is reclaimed, the next target is 145.
by BitcoinMacro
USD/JPY extends losses after BOJ SummaryThe Japanese yen continues to lose ground this week and is in negative territory on Wednesday. In the European session, USD/JPY is trading at 134.11, up 0.49%. Post-Christmas holiday trading remains thin, but USD/JPY has made steady gains and climbed 1% this week. The US dollar has recovered somewhat after last Tuesday's slide when it fell a staggering 3.8% after the BoJ widened its yield curve band. The move blindsided the markets, which had not expected any major policy moves prior to the end of Governor Kuroda's term in April. Investors were all ears as the BoJ released today the summary of opinions from last week's dramatic meeting. The summary of opinions showed that several of the nine board members said that the tweak to yield control was aimed at enhancing the current stimulus programme rather than ending it. This reiterated what Governor Kuroda stated in a press conference after the meeting. Still, speculation remains high that the BoJ could take further steps that tighten policy, and even exit the Bank's ultra-loose policy, especially with inflation running at a 40-year high. The summary of opinions indicated that members discussed rising inflation and the possibility that higher wages would remove the risk of a return to deflation. The BoJ has been focused on wages, arguing that strong wage growth will ensure that inflation is sustainable, as opposed to inflation that is driven by higher costs for energy and raw materials. The government is also making wages a top priority, and there are indications that major companies and labour unions will negotiate higher wages in the spring. If the BoJ sees that wages are rising it could raise its yield curve control target, which is currently around 0% for 10-year bonds. The BoJ will likely be back in the headlines shortly, with its next meeting on Jan. 17th and 18th. USD/JPY is testing resistance at 134.12. Above, there is resistance at 134.82 There is support at 133.25 and 132.29
by OANDA
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
by OANDA
Yen Pair Moves And The Right Market MindsetSo the Yen Pairs continued their move down.. But what can you take away from it? Well as it happens, there is a lot! 1) Markets will always have enormous swings one way or another. That is just simply the nature of anything that has value. Sometimes it will be VERY high, or VERY low. 2) Make sure you are going to remain solvent on an extreme move. 3)Understand that the Markets are not built for one Trade big wins. Its a process of taking lots of Trades over time with patience. So, you can see these factors from both the previous move and current one. Watch for more, aswell as my pre-determined entry/exit points. Trade Small and Trade Safe Always.
by WillSebastian
6
MFG: Long term strategyThis chart indicates a strong relation of MFG (generally applies to most bank stocks) with gov yield rates - 5 year Japanese bond in this case. Considering the chart pattern, there is still a possibility of testing a bottom for a couple of months, but the stock price should soon catch up with the yield rate. As the downside risk is limited, we may be seeing a great opportunity to accumulate and add these stocks to your portfolio for income gain. FRB started rasing the funds rate. This may continue for a couple of years and it is best to watch their monetary policy. The current inflation we are experiencing is worldwide and BOJ will follow FRB - FRB is running ahead of BOJ. FRB will tell you when to exit.
NYSE:MFGLong
by Tomatrader-X
2