USDJPY: LONG UPDATE - RENEWED JPY FISCAL STIMULUS SPECULATION?I posted earlier with my 107 USDJPY breakout trade (see attached post) - one of the reasons I said to long USDJPY on the 107 break-out was due to JPY Govt stimulus speculation.
In the last few hours we have seen fresh speculation of the JPY stimulus, with JPY20trn now being discussed/ proposed to be on the table - this renewed rhetoric is nothing but positive for the 107 breakout long trade i posted a few hours ago and supports it as YEN20trn is approximately $200bn, which is certainly enough new liquidity to give confidence to markets and spur risk markets onto fresh highs - further this JPY Govt stimulus is speculated to be combined WITH BOJ easing, so markets get a compounded risk rally since there are two potential drivers (BOJ cut rates by 10-20bps + add to maturity/ purchases of JGB and EFT).
Plus today after seeing the RBNZ's dovish economic assessment (where an Aug cut is almost 100%), this gives risk markets even more fuel thus encouraging $yen to trade to the 109-111 levels i expect - though BOE K. Forbes hawkish comments negate some of this.
The new JPY Fiscal stimulus speculation:
1. JAPANESE GOVERNMENT CONSIDERING 20 TRILLION YEN STIMULUS PACKAGE SAYS KYODO - "The government initially envisaged compiling a stimulus package of somewhat more than 10 trillion yen . But the size is likely to double as the package will now include projects for fiscal 2017 and beyond and increase "zaito" low-interest government loans by 6 trillion yen," Kyodo reports.
2. "The government initially envisaged compiling a stimulus package of somewhat more than 10 trillion yen . But the size is likely to double as the package will now include projects for fiscal 2017 and beyond and increase "zaito" low-interest government loans by 6 trillion yen," Kyodo reports.
3. "The stimulus could be even larger, they report. And able will look for the rubber stamp from the Cabinet in early August. About half will be earmarked for infrastructure."
Trading strategy going forward:
1. Trading strategy remains the same from the 107 breakout post that i made earlier e.g. 109TP1, 111TP2 - all that has changed from the post before is that the strategy has been reaffirmed/ strengthened upon this renewed JPY stimulus speculation , given this was one of the drivers i cited to move USDJPY to the 109 then 111 level once the 107 confirmation level was broken.
- In early asia trading, as yesterday, net risk sentment remains stable with safe havens gold, yen and bonds down as well as risk, though risk down slightly less. For the day, I expect risk-on sentiment to win as Thursday historically is the best day for stocks (before going into the friday end of week sell-off) + post market Wednesday some large firms posted outperforming earnings which should continue helping the risk appetite move higher (Intel + Morgan stanley beating EPS and revenue forecasts) when the main LDN and NY sessions get underway down the line.
*Check the "USDJPY: BUY THE BREAKOUT" post attached for more details on the trade discussed above posted 7 hours ago*
