Ready for More USDJPY Weakness


  • Sold USDJPY and booked profit on half
  • Safe haven flows still positive for Yen
  • BOJ may not want to be so aggressive

TAKING ADVANTAGE - Early Wednesday, we saw some wild and wacky price action in the Yen, with USDJPY initially surging on reports of details of this week's BOJ stimulus package, but then pulling back sharply once those reports were denied. But I was able to take advantage of the move. I was alerted to the sharp rally in Asia and quickly surveyed the price action determining the move was way too aggressive in some very thin trade, and that even if the package was confirmed, the risk for significant upside from there was limited. 

MANAGEMENT - But I got even luckier with the position, as the news ended up being nothing more than rumor and with that came the very fast retreat back towards daily opening levels. I have since booked a very nice profit on the position, exiting the final portion early Thursday. Now I'm not entirely sure whether or not USDJPY moves higher from here or not, but I do believe this market still has a good deal of downside ahead of itself and will be looking to sell again into rallies. There are two major reasons behind this view. 

The Yen still has roon to run higher..ie $USDJPY lower. Via @joelkruger

ONE AND TWO - The first reason is that I believe US equities are very close to another major pullback and with that pullback will come correlated downside pressure in USDJPY. The Yen is still (as much as it shouldn't be given Japanese fundamentals) a currency that benefits greatly from risk off flow and as such, lower equities should mean lower USDJPY. The second reason is the onset of comments from officials expressing concern over the limitations of monetary policy. There is a growing consensus that more is no longer better and this could keep the BOJ from doing too much this week.

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