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USD/JPY – Yen goes on a tear after BoJ rate hikeThe Japanese yen continues to sparkle. USD/JPY is trading at 150.27 in the European session, down 1.62% on the day at the time of writing. Earlier, the yen strengthened to 150.04, its highest level against the dollar since March 19. The Bank of Japan showed an aggressive side rarely seen at today’s meeting. The BoJ raised the benchmark rate to around 0.25%, up from the previous range of between 0% and 0.25%, its highest level since 2008. The move was considered aggressive, as the markets were uncertain whether the central bank would raise rates or continue to hold. The BoJ tempered the hike by noting in the rate statement that it expects real interest rates to remain “significantly negative” and that it will continue an accommodative policy to boost the economy. Still, this marks the second rate hike since March and demonstrates that the BoJ is serious about tightening policy and keeping inflation in check. Overshadowed by the dramatic rate hike, the BoJ announced it will taper its Japanese government bond purchases in half by the first quarter of 2026. The move will barely make a dent in the Bank’s bond holdings, but nonetheless indicates a shift in policy and the intent to unwind its massive monetary stimulus. The Federal Reserve will hold its policy meeting later today. It’s virtually certain that the Fed will maintain rates for a seventh straight time but that doesn’t mean today’s meeting will be a sleeper. Investors will be carefully following the rate statement and Jerome Powell’s follow-up press conference. Today’s meeting is a good opportunity for the Fed to set up a September rate cut, which the markets have fully priced in. USD/JPY has pushed below support at 152.70 and 151.38. Below, there is support at 149.59 154.49 and 1.5581 are the next resistance lines
by OANDA
DXY | JPY | CREDIT EVENT | DECRYPTERS Hi People Welcome to Team " DECRYPTERS" SO we Have 3 Main events this Week Lets Get A DEEP DIVE IN TO THEM 1- FED :- FED RATE HIKES ( PRICED IN ) + PRESS CONFERENCE ( HAWKISH ) AS we predicted Last time what Ever Happen Rate hikes will be increased we still stand by our words . Lets go further Either we are Getting 50 BPS This time or We are Getting 25 BPS next time WHY Is That So ... ?? The Attached Charts shows the overall level of financial conditions in an economy The conditions are on Same levels When FED was ABOUT to hike Rates Meaning . Further more —Dot plots , Fed curves ,GSUSCFI Index and Bloom Berg Index & Fall in Credit spread "ALL" Indicating ease in financial system Meaning this Data provide Evidence that FED Can increase More Interest Rates As Credit spread also falling to positive signal for economy — Rise In commodity Prices Like (RBAB Gasoline) Indicates more higher Prices in Energy sectors. — Lastly Good inflation trading above 20 years average & CPI Also printing higher on Y/Y Basis. 2- EURO RATE HIKES :- THIS comes With same Expectations Rate hikes + Hawkish Stance with & Lagarde speech. Lets Discuss JPY NEWS ON FRIDAY 3- BOJ REPORT :- A surprise can be Expected From Other Side Like They can Increase the range of "10 -years JGB" 50 BPS TO 75 /100 BPS ( BOND BUYING BACK PROGRAM) This will Cause bonds Prices to Rise / Yields to Fall & "JPY TO GET WEAKEN" —Other yield can React Negatively To IT ( LIKE US -10 YEAR)
FRED:NFCI
by DECRYPTERS
USDJPY Outlook 6th March 2023The USDJPY reversed strongly from the 137 round number resistance level, trading lower through the session on Friday, ending the week at the 135.80 price area. This move lower, as we know was due to the weakness in the DXY, hence, if the weakness continues, the USDJPY could continue trading lower, down to retest the 135.35 key support level. The USDJPY could see significant volatility this week, given that the JGB 10yr yield had recently breached the 0.5% ceiling and the BoJ monetary policy statement is due to be released (and it is Kuroda's last meeting as Governor). If the price breaks below the immediate support level, the USDJPY could see significant downside potential, with the next key support level at the round number level of 134.
Short
by JinDao_Tai
2
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.
TShort
by acrossthespread
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.
CME:6J1!
by aneekaguptaWTE
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
Timing the bond markets meltdownIs the UK bonds or the gilts the culprit that trigger the global bond markets meltdown? Not exactly. In fact, in April this year, there were clear signals that the global bond markets were already in trouble, and we will discuss that. Content: • Why we should not blame it on the U.K bonds, then who? • How to overcome this global bond crisis? Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. US T-Bond Futures: 1/32 of one point = US$31.25 32/32 is one point = 32 x US$31.25 = US$1,000 123 to 122 = 1 point = US$1,000 CME Real-time Market Data help identify trading set-ups in real-time and express my market views. 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
CBOT:ZB1!
by konhow
USD/JPY eyes Japanese CPIIt hasn't been a good week for the Japanese yen, as USD/JPY has climbed 1.24%. The yen is almost unchanged today, trading at 135.16. Japan wraps up the week with a key inflation release on Friday. Core CPI is forecast to rise to 2.5%, up from 2.2% in June. Japan's inflation rate is much lower than what we're seeing elsewhere, such as double-digit inflation in the UK. Still, after decades of deflation, inflationary pressures are a whole new world for Japanese policymakers, and the Bank of Japan is having to keep an eye on inflation, which is slightly higher than the central bank's inflation target of 2%. Unlike the Fed and the Bank of England which have declared inflation as public enemy number one, the BoJ is focused on stimulating the weak economy with an accommodative policy. That has meant being vigilant to keep JGB at low rates, even if this has resulted in a widening of the US/Japan rate differential and the yen falling close to 140 in July. Until the BoJ is convinced that inflation is not transient, a tweak or two is all we can expect with regard to monetary policy. The Federal Reserve minutes on Wednesday were essentially a rehash of the Fed's hawkish message; namely, that inflation has not been beaten and rate tightening will continue. Meeting participants said that the pace of rate hikes could ease once it was clear that inflation was easing, adding that there had not been signs of that so far. This is a very different take than the markets, which were practically giddy after US inflation dropped unexpectedly in July. The Fed has pledged to keep raising rates, but the markets are marching to their own tune and appear to be expecting a U-turn in policy, which has sent the equity markets higher and the US dollar lower. 135.46 is under pressure in resistance. Next, there is resistance at 1.3744 There is support at 133.60 and 131.62
by OANDA
Really important monthly close for USDJPYAs deflationary forces are taking over and bonds are rising, USDJPY is a key FX pair to be watching. Why? Because many players dumped Yen and their JGBs, as they expected higher and higher inflation and bond yields in the US. Now that US rates are coming down, JPY is becoming more attractive. Not only that, but JGBs are becoming more attractive as there is a smaller supply out there relative to a few months ago, while there are already lots of traders/funds who have been betting that the Japanese bond market would collapse. As deflation is coming back and Japan really has all the characteristics of a deflationary economy, buying some JGBs and Yen wouldn't be a bad idea. USDJPY swept a major high a few days ago, and then it swept it again today. A second failure and a monthly / quarterly close below that high, could be a major sign that more downside could follow in the short term. In the long term I am fairly certain that the USD will appreciate a lot more than the JPY for multiple reasons, therefore this is just a short term play. Anything from 131 and down to 125 is possible for USDJPY in Q3-Q4 2022, especially when the Fed is forced to reverse course and cut rates & resume QE. For quite some time I believe that CPI prints will be negative MoM. I also believe that the 2022 CPI print will be 4%, and that next June the YoY print will be 0 or negative. All that in the US of course, and of course I could be wrong. We could also see deflationary pressures take place and the USD rise against most currencies during that deflationary period / episode. Maybe we have a major crash at some point, one that would lead the Fed to take action once again, something that could send the dollar a lot lower. In case the market continues higher, and closes this week and next week above 135.7, then it is safe to assume that we'll be going higher regardless of the macro environment. Japan is lacking energy and food production, while it has worse demographics and debt that the US. Therefore it is very hard to see how the Yen doesn't depreciate against the US dollar. This means that every dip below in the 125-131 region is an opportunity to go long.
by BitcoinMacro
Japanese yen hits 20-year lowThe Japanese yen is slightly lower at the start of the week. In the Asian session, the yen fell as low as 131.35, which marked a 20-year low. The speed of the Japanese yen's depreciation has been remarkable, falling 12% against the US dollar in just three months. The formula for the yen's slide has been relatively simple - US Treasuries have been moving higher, while the BoJ has fiercely defended its yield control curve, capping the 10-year yield at 0.25%. Since the yen is extremely sensitive to the US/Japan rate differential, the dollar has pummelled the yen. Moving forward, the BoJ isn't about to change its stance and allow JGB yields to increase. The central bank is committed to an ultra-loose monetary policy and has been using debt financing, with the government's debt currently at a staggering 250% above GDP. This means it becomes a huge expense for the government if JGB yields move upwards. US Treasury yields continue to move higher, with the 10-year yield inching higher on Monday to 3.13%. The risk on USD/JPY remains tilted upwards, but the question is whether the BoJ will continue to sit on the sidelines and allow the yen to sink. Does the BoJ have a 'line in the sand' when it comes to the exchange rate? There had been talk of the 130-level triggering intervention, but that hasn't happened, as the BoJ and Japan's Ministry of Finance (MoF) have limited themselves to jawboning that they are monitoring the situation and are deeply worried about the yen's rapid descent. According to a BoFA note on Monday, 140 is a key line that could trigger yen intervention. The 140-level has held since 1998, and if breached, the MoF could respond and buy yen in order to stabilize the currency. In the meantime, the yen will likely continue to lose ground, with the Federal Reserve expected to continue to tighten at an aggressive pace. USD/JPY faces resistance at 1.3136 and 1.3218 Ther is support at 1.3000 and 1.2918
by OANDA
ridethepig | JPY Spot Commentary 2020.02.04Risk markets recovering, well done all those who voted to buy the dip overnight in the Asian bounce. PBOC suturing the wound (for now). On the macro side, strong data from the US manufacturing side should be taken with a pinch of salt as was helped massively via phase 1 and too soon to measure any viral impact. Flow wise, I noticed a lot of fast money clients buying JPY offshore which is reassuring for my shorts. On the Daily chart we are still yet to break through Support : I am looking to add more at 109.2x with initial targets at 108.8x and 108.3x on the day. No one wanting to fight alone against the USD devaluation, sellers are ready to beat the living daylight out of late buyers. Don't forget we can comfortably lean on the 2020 Macro flows for USDJPY: Good luck all those on the sell side, a lot of meat left on the bone and we can open up the short-term flows if we get enough interest in the comments below. As usual thanks for keeping the support coming with likes, comments, charts and etc!
Short
by ridethepig
2
How to play the Corona Virus from a macro perspectiveI am not a virologist, but I understand sentiment and a large part of my trading is looking at where people are overly fearful and where they are too complacent (at a basic level)... It's why I use Twitter so much. It's a great sentiment resource. If you were to do a search for Corona Virus on Twitter, 90% of people are bricking it. But step away from that and you find that people are still going to work, there's only small columns in newspapers talking about it and there's little mention of the amount of people the Influenza (flu) virus kills each year... This will sound crude, harsh and morally reprehensible, but I said to to people that follow me this morning that we want to be selling AUDJPY as a risk proxy (and because the Japanese 10 year is in for a rally, and AUDJPY follows the Japanese 10y yield, paradoxically) and to be taking some off with each new death toll announced, which seems to be revised every few days. As each death toll is announced, we get a greater understanding of the severity, which leads to a greater pricing of risk, and therefore, flattening of volatility. I always say, be aggressive when vol picks up and reduce your position when it flattens. Rinse and repeat, until another big theme emerges. I think the understanding of risk and trade management through the understanding of volatility is one that flies many by... So if you'd like to know how to better manage trades in this fashion, don't hesitate to shoot me a PM!
Short
by FinkPro
TY1!: ABCB completion on structural multi-decade trendlineIn a world where bunds and JGBs are zero bound, why wouldn't 3% yield and an appreciating USD be attractive to global investors? There is a weekly ABCD completion in the TY1! on high volumes which coincides with a major multi-decade structural uptrend support. A break above 119.40 in the 240M chart would be confirmation. A long in the UST10 can be hedged off with a short in the ES1! where momentum is waning off.
TLong
by WellTrainedMonkey
USDJPY - BOJ MISS; FISCAL STIM PACKAGE & TRADING YEN FROM HEREBOJ - 3trn increase in annual ETF Purchases + $24bn increase in USD funding for banks 1. The BOJ on Friday delivered a shockingly poor package, imo they changed the snallest part of their current QQE programme. 2. What was interesting though was the markets reaction - immediately after the decision $Yen spiked higher then lower to 103 level but from then and into and through the London Open $Yen was being brought/ held up around the 103 level - it wasnt until NY came in at 1430GMT that $Yen broke lower. - But even then it was surprisingly a laboured move lower, taking almost the full NY session to find its lowes. - Some of the UJ weakness was down to a big GDP miss of 1.2% vs 2.6%exp, which sold the rates market off now implying only a 12% chance of a hike in September vs 18% the previous day and 25% earlier in the week, so i t would have been interesting to see what would of happened with out this dollar downside impetus. USDJPY from here: 1. Personally from 102.00 i see $Yen lower in the near term e.g. we could easily open 50pips lower on sunday into the key level at 101.5 as the asia session adds to shorts that they missed during their own session post-BOJ. - There is the possibility that we see some upside in $Yen as the MOF releases their fiscal package - the more actual govt spending the package includes and the shorter the timeframe, the greater the impact of the fiscal package on giving UJ some relief - but still i advise shorting rallies as i beliveve we move into the 100s from here. - That said in reality the impact of the fiscal package is likely to be limited if not completely muted as 1) the market already knows the extent and some of the details of the package and has done for the past week+ e.g. 28trn of which the market baring piece, the govt spending, is rumoured to be around 13trn - so this information is likely already baked into the price and imo was the driver of the support we saw on friday at the 103 level (asia/ ldn sellers wary of shorting in anticipation of the fiscal package). Thus any topside is only likely to come if MOF changes this dramatically to say 20trn govt spending (anything less is already pre-priced imo) OR even increases the package (but this is also unlikely as Japan has the highest govt debt:gdp ratio as it is) - but imo it is unlikely they would do either anyway. - In-fact, i actually believe the MOF stimulus package has asymmetrical risks to the downside/ disappointing markets - as several MOF officials have commented that the 28trn package is such a large package that it is likely to be over several years - thus the longer the MOF stretch the package over more disappointment the market will price and this could actually end up being a driver for more Yen appreciation given some expected the whole 28trn in one year - which isnt impossible given the size of the Japanese economy (20x bigger than the package + not all of it is in fresh govt spending). UJ View/ Trading strategy - Sell USDJPY asap @mrkt 102 - 100TP1 99TP2 - or wait for the 30/40% chance of a bounce and sell from 103/4 on Tuesday: 1. So I see UJ moving lower from here to the 100's, until Tuesday where i see there being a risk of the market gaining some topside MOF stimulus surprise (which nonetheless is capped at 103.5-104 tops - in which i would sell) but more likely MOF disappointment (e.g. 5y package, less than expected actual spending) which will give UJ seller more ammo and could push us through the 100 level, assuming UJ has traded on the offer since Sunday open (which is likely imo)..
Short
by QuantumLogicTrading
14