JPY - How long is it strong?

Hi you guys,

Japanese Yen appreciation has remained for a couple of months as the 100 level has been left quite far since April. The point is that how long it happens.
I had not so much time to trading in recent days, however as dealing with many FX deals from Japanese customers, I can see how hot this issue is outside my desk.
Therefore, today, I have made a few quick positions. The result is not bad.
I took a long USD at 89.513 for USD/JPY pair. I didn't use technical analysis for this position while captured few notable events. After nearly 1 hour, I closed the postion, and the price was 89.668.
89.513 appeared as the lowest price since the begin of this week.
In term of analysis, I'm bullish for Yen as Japan has been suffered in deflation as its cpi continued to contract 2.4% yoy which just released on Monday. Otherwise, versus USD, we can agree that it already get over the bottom of crisis. Therefore, concern on inflation will get back soon though it is too early to say that. So I think that the strength of Yen will remain at least until the end of this year.
However, in converse action from Japanese gov, I think they definitely will interfere on the market. In a country where the social duty is the highest value, brand new Japanese leaders understand that the longer Yen appreciate, the worse export-dominated industries' performance are.
Anyway, just a short post, I wish to hear more from you guys.

Hi, my opinion it is better to stay off this pair. Will be sound like conspiracy theory, but I think this pair situation is over fundamentals and technicals, it is more like big guys serious conflict. I follows news regarding this pair on bloomberg, so far I see, brand new, new government in japan, they want to act differently, break this cycle of weak yen strong usd, but strong yen .......,
at the end my opinion sooner or later BOJ will be strongly pushed to intervene. But when, we can even see 85 or lower before that.
last word " if you want to face with your boss, you have to be ready for the consequences"

Well to be honest the Yen depreciation was paired with equity rally in march but then peaked out in april and ever since has been in a down trend. Recently however, we have been seeing dollar strength (even in the yen pairing). I think this is temporary for the Yen as it is still in an appreciating up trend (JPY/USD down trend).

Most of the movements these days with the Yen pair have to do with the economic health of Japan and even more so about the political situation. These past few months I have avoided trading the Yen because of the different fundamentals that have been moving it.

From a technical stand point the JPY/USD is still in a down trend (yen appreciation), though it is experiencing some slight depreciation at the moment (as all major pairs are).



Your trading seems interesting, it seems that you were scalping the markets. Try and build a thesis and trade for a longer time frame and see what you did right and what you did wrong. Also I will send you some trading journal templates that you can start usign to track your trades. Its good to see you posting son!

-snapman

Well,today, the most captured event for Yen was from the statement of Nipon Finance Minstry as they insisted that he was misinterpreted in supporting Yen strength policy. "if the currency market moves abnormally, we may take necessary steps in the national interest", said him.
So, i can argue strongly that Japanese government would definitely intervene the market once they think that Yen appreciation is enough. But we dont know how much is enough.
I felt a bit regretful this morning when I saw USDJPY was nearby 90 level. Now I'm waiting for some key indicators from US to see how good the US economy's health is so far. I think it may be better as estimated. So I still short the Yen.

Hey guys,
While I don't often trade the JPY (mainly because I need to sleep during the night in Europe...) and far from an expert, let me drop here a few thoughts :
- First I have always been convinced that below a certain level of the USDJPY (say 85-90), the Japan would consider itself not competitive enough for its exports and would intervene to support its weakness. That's the situation that we may see now, but it is mitigated firstly by the government change as almbayrak66 mentioned and I 'm not sure what their policy is and secondly in the current environment, I'm not sure how the Japan can support more weakness with rates already at 0 and massive (and inefficient) QE policy for a while.
- Secondly, as Snapman mentioned, the USDJPY was strongly paired with risk aversion : post Lehman, as the stock markets fell like a stone, investors massively unwound their carry trades, which was a very common strategy used by a lot of hedge funds, and this drove the strong JPY appreciation with the crisis. To some extent the JPY has become a "safe haven".
Now when the stocks started rallying back in March, it is not surprising that the USDJPY didn't follow and came back as the carry trade strategy doesn't make sense anymore (no more interest rate differential between the Japan and the US).
Should the stock market drop consequently again (what I think unlikely), I believe the impact on the USDJPY would be limited as I guess that most of the carry trades have been unwound between October 08 and March 09.
To summarize, my point here is I think that the USDJPY is not anymore linked to the risk aversion as it used to be : the risk aversion play as we could do with EURUSD is over.

- Finally Son, monetary policies, political interventions, macro-economics events,... can take months to have an impact on the market. The forex market is very noisy and volatile and even when you are right it can go for a while against you. So that's why I'm not sure your rationale to enter into a deal is appropriate for a trading style where you hold your position for a couple of hours as you describe. For example, when I trade for the kind of reasons you mentioned, I keep the deal for generally a couple of weeks, months or even years (for instance my gold position is almost one year old with a profit of more than 30,000 pips!). Lately I wish I didn't take some profits on EURGBP after "only" a few weeks. A piece of advise, if you want to keep on playing the intraday and have positions for a couple of hours, you should focus more on Technical and chart Analysis.

Sauros brings up many good points. Risk aversion plays maybe limited. Though relative economic health differences across countries may attribute to some sentiment moves that can be interpreted as risk aversion plays. For the overall trend I will argue risk aversion led trades may not pan out as well as central bank led plays. Though in the short term you can play certain economic reports such as jobless claims or other jobs reports that may move currencies temporary against overall trends. It would be interesting to get some updates on central banking policy across the different regions.

Also, as Sauros points out, if you don't have the time/guts/patience to trade long term, you should put more effort into technical analysis, but it requires lots of focus and concentration for the periods of time you are trading ( at least in my opinion, time is not a luxury i can indulge much these days... )

-snapman

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The real question is how long before the USD carry trade ends?

Batman wrote:

The real question is how long before the USD carry trade ends?

you mean before it really begins for currencies, its already being used in other securties as a carry trade but not as much for currencies. if currencies see huge carry trade using the dollar that can have fundamental economic consquences.

Exactly.