Thread: Discuss USD/JPY, GBP/JPY, and other JPY Pairs

Originally Posted by Firewalker

Yes, I am aware of what happened between 1930-32. I don't know, all of this sounds like rationalizations to me. You may turn out to be right. My basic assumption is that governments, having built such large debts in the West over the past 20 years, will not survive an attempt to cover the losses. Many, many banks will have to be allowed to failed, or governments will fail. Also, a collapse in economic activity, which now appears inevitable, is going to constrain cash flow for both the banks themselves (and cause a quick acceleration of further debt losses) and governments. This will make the situation now look stable. Perhaps that won't happen. I am myself the sort who assumes the worst so as to be pleasantly surprised when it doesn't turn so bad. But ... so far I haven't been surprised.

I am the same way Firewalker. My outlook will almost always fall to the skeptical side of things; but I like to think myself evenly skeptical. I agree that many more US banks could fail. What's more, the consumer is likely to follow by reducing its spending and if not, increasing the rate of defaults substantially.

At the same time though, I think Japan is in just as dire straights. While Japanese are on whole net savers, the country has suffered from a investment crunch since deflation took over and the 1997/98 Asian financial crisis took over. In turn, Japanese banks and investment houses had to lend and most of this interest was from and in other countries. This means there is considerable exposure on Japan's part. Add to that the recession that will be drawn out from an a domestic consumer that was never spending anyway and now no capital reinvestment and the island nation will be joining everyone else on the way down.

IMO, the outlook for the two economies and their respective investment environments will be about even and USDJPY will eventually find a level of equilibrium and some stability in price action.

For positioning now, I'm just waiting to see if 96 holds up as new resistance (as a former support level itself). I don't think I would go for any longer than a day trade or very short swing trade at this point anyways. Volatility is too high and there are few near-term zones of support and resistance to work with.

After briefly breaking the 96.00 price level the USDJPY has failed to strike above the resistance level despite the rebound in equities. Speculation of intervention from the Japanese MoF has failed to fuel bullish sentiment. However, if we see an extend move higher, look for possible intervention as the BoJ will see this as an opportunity to impact price action.

Anyone notice the price action is similar to what happened at the 110.00 level before it tanked? There where expiries at the 98.50 on the 30th and 31st. The Chicago Mercantile Exhange has currency futures for December settlement at 1.0319 with 126,776 contracts. The open was at 1.0100 and ran as high as 1.0435 as of Oct. 30. I wonder how this may come into play for December. The Japanese probably will not do well selling cars abroad with the Yen at current levels.

Written by Terri Belkas, Currency Strategist
Forex carry trades slumped on Friday, as the Japanese yen ultimately ignored the Bank of Japan’s 20bp rate cut as the currency rallied over 2 [percent against the Australian dollar and British pound while rising more than 1 percent versus the Canadian dollar, euro, and New Zealand dollar.
According to comments from BOJ Governor Shirakawa, three dissenters actually wanted a 25bp rate cut while one member of the rate-setting committee wanted to leave rates unchanged. Mr. Shirakawa also said that there has been a clear change in export and production trends due to the Japanese yen’s strength, and that the rate cut was meant to keep conditions “accommodative.” However, if Japan really wants to make an impact and weaken the yen, intervention may be the only option. The government has not done so since 2004, but they have a long history of doing so successfully since they hold the second largest amount of foreign currency reserves in the world (China holds the most). As a result, Japanese yen traders should be alert in coming weeks, as another sharp rally in the currency could persuade Japan to take action.

Originally Posted by vanv

Anyone notice the price action is similar to what happened at the 110.00 level before it tanked? There where expiries at the 98.50 on the 30th and 31st. The Chicago Mercantile Exhange has currency futures for December settlement at 1.0319 with 126,776 contracts. The open was at 1.0100 and ran as high as 1.0435 as of Oct. 30. I wonder how this may come into play for December. The Japanese probably will not do well selling cars abroad with the Yen at current levels.

Written by Terri Belkas, Currency Strategist
Forex carry trades slumped on Friday, as the Japanese yen ultimately ignored the Bank of Japan’s 20bp rate cut as the currency rallied over 2 [percent against the Australian dollar and British pound while rising more than 1 percent versus the Canadian dollar, euro, and New Zealand dollar.
According to comments from BOJ Governor Shirakawa, three dissenters actually wanted a 25bp rate cut while one member of the rate-setting committee wanted to leave rates unchanged. Mr. Shirakawa also said that there has been a clear change in export and production trends due to the Japanese yen’s strength, and that the rate cut was meant to keep conditions “accommodative.” However, if Japan really wants to make an impact and weaken the yen, intervention may be the only option. The government has not done so since 2004, but they have a long history of doing so successfully since they hold the second largest amount of foreign currency reserves in the world (China holds the most). As a result, Japanese yen traders should be alert in coming weeks, as another sharp rally in the currency could persuade Japan to take action.

I know this is the USD/JPY thread and not the GBP/JPY or EUR/JPY, but here seems a good place to position this question.

If the Japanese government does intervene to weaken the yen, does it weaken the yen just against the dollar or has it done so equally against the euro and sterling also ?

With intervention perhaps an invisible barrier to the rapid increase the Yen has seen recently, I've been wondering if there is any reason for the carry trade not to continue strongly. The rates offered in risky countries like Iceland, at 18%, must be appealing to many.

I would also be surprised if the BoJ just sits idly by and lets its currency appreciate to the point where it will have a horrible effect on exports.

Originally Posted by arranp

I know this is the USD/JPY thread and not the GBP/JPY or EUR/JPY, but here seems a good place to position this question.

If the Japanese government does intervene to weaken the yen, does it weaken the yen just against the dollar or has it done so equally against the euro and sterling also ?

From a practical standpoint, the depreciation in the yen will be against whatever currency the Bank of Japan bought for their yen. This would either be all US dollars or a number of different key trade partner currencies.

Realistically, these interventions have little actual influence on the exchange rates (they are working with billions when the market does trillions in a day). The real shift in rates comes when they announce that they had intervened. They are pretty good at timing their intervention and announcement. I think they have some pretty good traders at the BoJ.

Originally Posted by RomanK

With intervention perhaps an invisible barrier to the rapid increase the Yen has seen recently, I've been wondering if there is any reason for the carry trade not to continue strongly. The rates offered in risky countries like Iceland, at 18%, must be appealing to many.

I would also be surprised if the BoJ just sits idly by and lets its currency appreciate to the point where it will have a horrible effect on exports.

Just think of it this way: would you be willing to making something like 12% (a practical spread between to the two countries' lending and investment rates) a year at the risk of seeing Iceland devalue their exchange rate in one fell swoop that not only forces you into a margin call, but further drains all the money you have because you were trading on 100:1 leverage and you are in a deep negative balance.

These are the types of markets that disasters like revaluing currencies occur in. Not a time for idly placed capital.

I wouldn't take that chance, but I can't even begin to guess the likelihood involved in that scenario. Though it could end horribly, there will always be traders who overlook or are more comfortable with that kind of risk.


I've been wondering something else though lately:

With the dollar still holding onto much of its October gains against major currencies, despite our economy getting worse and funds futures now expecting a cut, do you think we could realistically see USDJPY back to September levels before year end or is that just really unlikely?

Originally Posted by RomanK

I wouldn't take that chance, but I can't even begin to guess the likelihood involved in that scenario. Though it could end horribly, there will always be traders who overlook or are more comfortable with that kind of risk.


I've been wondering something else though lately:

With the dollar still holding onto much of its October gains against major currencies, despite our economy getting worse and funds futures now expecting a cut, do you think we could realistically see USDJPY back to September levels before year end or is that just really unlikely?

The credit markets thawing and the current election rally helping drive risk appetite may get the pair close to the September lows, but once the fourth quarter data starts revealing the impact of the credit crisis another bout of risk aversion will drive it lower. A 200,000 decline in Non-farm payrolls on Friday could end its current momentum.

I took a risk on JPY. Lost my short trade , But activated a long.
Can someone analyze this and tell me what you would do on stops and limits.
Thanks

Originally Posted by cliff

I took a risk on JPY. Lost my short trade , But activated a long.
Can someone analyze this and tell me what you would do on stops and limits.
Thanks

First of all, I would say be more confident in your stops than the overall trade itself. Always control your risk.

It looks like you placed your stop below that former resistance level. Personally, I would go to a lower time frame chart and pull up the trendline that defines momentum and set my stops with a considerable buffer below that.

Another trade Idea How would you analyze this opportunity trade ? Too risky or rewaring ?

Originally Posted by cliff

Another trade Idea How would you analyze this opportunity trade ? Too risky or rewaring ?

I hope that thick gray line isn't a trendline. If it is, I don't foresee many other market participants following it - and if no one is looking at it, no one will respond to it.

The general idea behind your setup is good. In terms of determining a stop and limit in relation to entry.

When I look for technical setups, those that are taken typically have at least two easily recognizable technical formations supporting the trade, a good risk/reward and holds with the larger trend (I do go against the dominant trend, but my rules become more complex and restrictive). Perhaps these are things that may help you out.

Yes lol, that thick gray line is a trend line I drew, from your reply you didnt like that line I drew for a trend line
? Or wasnt verifiable enough for a good trade ? I dont understand the quote-( I hope that thick gray line isn't a trendline. If it is, I don't foresee many other market participants following it - and if no one is looking at it, no one will respond to it.). Can you explain a bit , ,Im sorry if its somthing simple but can really help me out.
What are your restrictive rules and at least two technical patterns that you like to see ?
Thanks for your help !!


[QUOTE=John Kicklighter:I hope that thick gray line isn't a trendline. If it is, I don't foresee many other market participants following it - and if no one is looking at it, no one will respond to it.

The general idea behind your setup is good. In terms of determining a stop and limit in relation to entry.

When I look for technical setups, those that are taken typically have at least two easily recognizable technical formations supporting the trade, a good risk/reward and holds with the larger trend (I do go against the dominant trend, but my rules become more complex and restrictive). Perhaps these are things that may help you out.[/QUOTE]

Originally Posted by cliff

Yes lol, that thick gray line is a trend line I drew, from your reply you didnt like that line I drew for a trend line
? Or wasnt verifiable enough for a good trade ? I dont understand the quote-( I hope that thick gray line isn't a trendline. If it is, I don't foresee many other market participants following it - and if no one is looking at it, no one will respond to it.). Can you explain a bit , ,Im sorry if its somthing simple but can really help me out.
What are your restrictive rules and at least two technical patterns that you like to see ?
Thanks for your help !!

I'm a firm believer that many technical indicators works in a self-fulling prophecy manner. For trendlines for example, if there is a very clear level (like the think white line in the chart I have attached) then it will be visible to more traders and they will in turn react to it. The trend line you have drawn seems to cut through the middle of a lot of price action, so I don't think it would be an otherwise 'popular' line to follow.

There are many restrictive rules I have made for myself and many more technical patterns that I have come across in my trading. These types of things should be unique to each trader, so you should learn what works for you over time with many traders. Just make sure you test these things on a demo or with very very low leverage to get your bearing first.

Originally Posted by cliff

Another trade Idea How would you analyze this opportunity trade ? Too risky or rewaring ?

I would give a suggestion. Of course, it may not sound appetizing because it means not getting big profits on a single trade. But you may find that a good beginning strategy is to set very modest take profit limit orders. Don't worry about that you could have made way more in hindsight. The point is to learn to choose trades that do not hit your stops. Once you do that consistently, you are sailing.

Sit and do the math. Assume 15 pip profit trades once a day. It's like compounding interest and its way more than you'd get from any money market fund, etc. When you get better, starting trying for 20 pip trades. Etc.

"No one ever went broke taking profit."