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USDJPY: Strong View

Tyler Durden's picture





 

Submitted by Nic Lenoir of ICAP

As you by now well know I am fundamentally bullish USDJPY for the long term. Leaving aside the fundamental economic problems of the Japanese economy, the BOJ has recently pretty much committed to pursue QE until they can somehow manufacture inflation, the debt to GDP ratio is 200% and rates are at 0% so comparatively the USD has nothing to be ashamed of, and the Fed is starting to pull out liquidity from the market. Therefore if risk doesn't collapse (as it would trigger the usual flight to quality in JPY / carry trade covering) the elements in terms of monetary policy and rates cycle are also in place to support economic fundamentals.

Technically, we see the market shows bullish divergence as the RSI has bounced on the long term support and is not validating the recent lows in price. On the daily chart we see we have challenged several times 2 key resistance trendlines and we appear ready for a break-out. We then zoom in on the hourly and see that we are back on the 89 support, and there is strong divergence in momentum indicators. A break at 89.50 would trigger an inverted H&S which is the short-term signal we need to confirm the next leg up is upon us. Alignment of big picture fundamentals and technicals give us a strong view on the strade, but we will wait for the validation at 89.50 as risk aversion and flight to quality have so far been the killer for this otherwise very sound macro trade, and we need momentum on our side.

Good luck trading,

Nic

 


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Tue, 03/02/2010 - 14:10 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The Yen will be the next shoe to drop in the currency wars, after the Brit 'ish Pound (pound as in weight, as in Lira, as in Larr) Sterling gets the wrong end of the stick (ok Euro, now go sit in the corner).  The Yen will run to maybe 95, but not much higher, as the Doelarr's QE Dos will begin shortly.  The only currencies that will show real strength this year will be NZD, AUD, and CAD.  Their collective strength will peter out in 2011, as they face the same problems as every other currency (huge debt, poor markets ie housing).  Either way, btw, gold to crush all markets here on out.

Tue, 03/02/2010 - 14:38 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

Advise to BOJ: You want inflation right?

Get together with the Japanese heavy industries and bid contracts overseas on the cheap now. Once the Yen weakens, start repatriating money.

Rince and repeat.

Tue, 03/02/2010 - 14:41 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

2nd advise to BOJ

Formula 2:

Bid overseas contracts with deferred payments.

Same drill. 

 

Tue, 03/02/2010 - 14:42 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

doublicate

Tue, 03/02/2010 - 14:57 | Link to Comment schatzingrid
schatzingrid's picture

Go and read : http://www.mckinsey.com/mgi/reports/freepass_pdfs/debt_and_deleveraging/debt_and_deleveraging_full_report.pdf

Then you will understand that Greece is a starter and the main course is...

Tue, 03/02/2010 - 15:40 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A yummy reference to food!  soylient green?  haha

Tue, 03/02/2010 - 15:45 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

dupe.

Tue, 03/02/2010 - 16:17 | Link to Comment SteveNYC
SteveNYC's picture

Does anybody have a clue as to why the piece-o-shit small caps are almost making new highs? Many of these (garbage) companies don't even have earnings, pay no dividends, and are not growing. What the fuck gives?

Tue, 03/02/2010 - 17:36 | Link to Comment Anonymous
Tue, 03/02/2010 - 17:49 | Link to Comment deadhead
deadhead's picture

bubblemania...rut hit a high at 650 ish today.  just a symptom of the hot money syndrome.....ben bubbles bernanke at work.  market ready to take is my read.

Tue, 03/02/2010 - 19:11 | Link to Comment SteveNYC
SteveNYC's picture

Deadhead, anon, thank you both for your insight. I get the feeling this bitch (RUT) is going to go down faster than a Harlem Hooker once the rout starts. Might take my first position of the year, some TWM.

 

 

Tue, 03/02/2010 - 22:13 | Link to Comment Anonymous
Tue, 03/02/2010 - 17:24 | Link to Comment Anonymous
Wed, 03/03/2010 - 03:34 | Link to Comment Anonymous
Tue, 03/02/2010 - 17:24 | Link to Comment Anonymous
Tue, 03/02/2010 - 18:38 | Link to Comment Anonymous
Tue, 03/02/2010 - 18:12 | Link to Comment superz
superz's picture

Very nice View

Tue, 03/02/2010 - 18:40 | Link to Comment Anonymous
Tue, 03/02/2010 - 18:20 | Link to Comment Anonymous
Tue, 03/02/2010 - 19:12 | Link to Comment Anonymous
Tue, 03/02/2010 - 19:28 | Link to Comment Gordon Shumway
Gordon Shumway's picture

For all you yen bears, beware the Japanese fiscal year end repatriation shenanigans. This, combined with extreme consensus the other way, makes me think we see Y83 before eventually softening big time.

Also, watch China. If RMB creeps higher, that's definitely going to provide midterm tailwinds for JPY.

Longer term, doom. That I can agree with.

Tue, 03/02/2010 - 19:28 | Link to Comment Anonymous
Tue, 03/02/2010 - 23:02 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I am pretty sure dxy has topped (81.4).....maybe after it moves to 66 we get some resistence, but it is pretty much downhill from here........let the final cascade commence........

Fri, 04/16/2010 - 09:36 | Link to Comment mark456
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