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Is USDJPY About To Take Off?

Submitted by Tyler Durden on 03/24/2010 14:08 -0400

Nic Lenoir

Submitted by Nic Lenoir of ICAP

It is our long held view that USDJPY is headed much higher than where it is now. Today we attach a chart of the 10Y US Treasury yield and USDJPY. We can see on the monthly chart that US yields and USDJPY are highly correlated, and that over the last 10 years divergence between the two has been reducing a lot. This goes along with correlations across markets increasing dramatically over the past decade. However zooming in using the weekly chart we see that over the last year or so, USDJPY has been underperforming quite strongly US yields compared to their historical relationship.

Looking at USDJPY, we recommended to buy on the break of the resistance trendline hourly and in light of strong bullish divergence around 88.50 (03/04). Looking at the weekly chart, we see that we are now closing in on the major resistance of the bearish channel at 92.70. A break here would certainly lead to the start of a much bigger move. There is currently no divergence hourly, but the RSI is around 85 so lightening positions a bit is probably a sound idea. We would keep some core longs and trim tactical positions.

Gold has sold off after triggering the highlighted short term H&S last week and is currenctly on support. As long as we do not close daily below 1,075 here we would build longs, and a break above 1134 would confirm a move towards new highs.

Good luck trading,

Nic

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Wed, 03/24/2010 - 14:13 | 274668 fUny1

Here's what you need to know about this global economic recovery:

The last world cup had 15 million bids for 3.3 million tickets.

The upcoming world cup has a 650k ticket shortfall for 2.9 million tickets.

Regardless of the bungled mess poor South Africa is. This is just a staggering drop in demand for tickets and it shows you how deep the mess we are in financially.

They can try, but not even the Our Propagandist Government, the FED and Government Sachs can do much about this situation.

http://funy1.blogspot.com/2010/03/fifa-is-facing-trouble-with-world-cup....

Wed, 03/24/2010 - 14:21 | 274681 Orly

If that's your economic indicator, then you are sadly deluded.

They are literally dragging people through the streets in South Africa. Baboons are taking over some of South Africa's best vineyards and there is nothing the landowners can do about it. Think I am lying? Look it up.

Four years ago, I predicted this would happen on another blog. Boy, was I a racist!

Not so racist now, am I? More practical, I would say.

Wed, 03/24/2010 - 16:39 | 274885 Steak

anyone going to a world cup game in ZA will be 100% safe...hang out there for a few weeks maybe you'll have some problems, but people worried about security to at and from the games have overactive imaginations

Wed, 03/24/2010 - 14:34 | 274700 Jo

Yeah watching this line like a hawk. Faded it the last time and it worked a treat but on my charts it's already through that line.

Think we go up.

Wed, 03/24/2010 - 14:44 | 274715 Orly

Some mean reversion is warranted here on the USD/JPY.

Wed, 03/24/2010 - 14:56 | 274731 schatzingrid

31/03 is the end of Japan fiscal year, therefore a lot of japanese companies have brought back home profits and bought a lot of JPY vs USD and EUR.

So USD should take off (but watch the 2Y10Y UST spread vs 2Y10Y JGB spread and adjust with the CPI).

Wed, 03/24/2010 - 15:11 | 274752 gmak

A hedge fund apparently bought 3 yards of USDJPY to push it up to near 92. Tail riders did the rest.

Wed, 03/24/2010 - 16:41 | 274887 Steak

So if yen is falling versus the dollar and euro is falling versus the dollar...what will that do for the EURJPY that has served the market so well up till now?

Tue, 04/13/2010 - 06:44 | 297826 mark456

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Is USDJPY About To Take Off?

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