[still long from
106.80..............Closed @ 107.14....Prfts booked
106.47...............Closed @ 107.21....Prfts booked
108.23
108.00
107.90
106.00................Closed @ 106.40....Prfts booked
105.08................Closed @ 106.40....Prfts booked

GBP/USD long @
9760
9780


GBP/USD long @ 9700.......Closed @ 9811...Prfts booked[/quote]

__________________
Warning follow @ own risk...I dont use stop loss I hedge

Thanks to the pick up in volatility across the majors today, we may be looking at a great USDJPY trade. A fib confluence, 50-day SMA and (most importantly) a rising trend are all being tested around 105.80/106.00. So, you can position for a breakout of rebound back into the range.

Personally, I think the drain in liquidity going into the weekend will settle price action and the momentum needed for a major break will disappear (obviously this all hinges on the UMich confidence report due in minutes).

Took an exploratory long at 106. If the data doesn't accelerate declines, I'll go in on a full position.

Anyone else watching this? Any shorts?

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Does anyone know why eur/jpy is at these lofty levels? It seems that with the financial system in meltdown, and worldwide stock indices in bear market territory this should be ripe territory for the yen. But the yen is doing fairly poorly against most cuurencys and at lifetime lows against the euro even as the euroland marches merrily on to recession. Does anyone have a thesis for this? Is this temporary,and what is the long term high likely to be?

Well, I wouldn't say that risk sentiment has plunged. IMO, the capital markets are looking at a natural bear market, but not another round of credit-born panic selling - though that may come later.

Carry traders have been on the sidelines as they wait to see whether regulators efforts to prop up lenders, support consumers with bad loans and redefine regulation can come in time. With second quarter earnings starting in earnest for Financial firms next week, I think the clock is ticking. That works well with USDJPY, which can't go without a breakout for too much longer.

As for EURJPY, the ECB is still raising rates and has given no commentary suggesting they would stop. What's more, their own projections for growth show nothing of a recession - just a cooling off of the recent 15-year high. It's hard to generate contrarian momentum with prices near record highs and officials offering bullish forecasts.

John, you asked if anyone was short. I'm short from 108.25 on 6/18 having taken some profits and moved stops on the first ride down past 106.00.

New to the forum, so it's interesting to see trend lines and S/R from different perspectives. One thing's for certain--it's going to go somewhere sometime soon (let's hope so, at least).

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The USDJPY mini-cycle from Jun-30 Jul-1 ended Friday 11th. I have a multi-month trend line that is being tested, and I expect the pair to rise back towards 108.60, from Thursday. Note that the 10565 low was precisely on the 76.4% retracement of this completed sub-cycle (Jun-30). Looking at larger cycles, 7-day momentum is on a bounce level, and it would be easy to take out 110 in July and target 114 in August. However, that may be getting ahead of ourselves, though 108 can easily become the base for August as later this year 114 and 118 are targeted for the second shoulder range.

Monday update 8.24: short trade 106.65 for a 105.85 retest

Looks like Paulson's efforts to bailout Fannie and Freddie are giving support to the USDJPY and USDCHF as risk appetite increase. We may see a test of 108 today.

If Paulson decides to play for Santa this year by bailing out Freddie and Fannie (in cooperation with the congress) the U.S. taxpayer gets the bill. So whatever happens, someone has to pay. USD JPY Is living on borrowed time. I am looking for the downside. Last Friday showed how fast things can change with respect to risk appetite.
Good luck!

Well, if this is what the market believes, i think they are wrong.
It seems rather that it is just herd mentality because buying euros has been the thing to do over the last 8 years.

In the eurozone Italy and Spain are allready in recession. Germany which has distorted the figures for the region higher is going to have a contraction in q2 according to german officials, and France is not in good condition either. Other countries in EU are also in recession. it takes a lag of 12-18 months for monetary policy to feed through to the market, so even if the eu cuts this month which they wont, they wont impact until eu is deep in recession. The EU hasnt really solved the structural problems in the economy and once in recession it takes along time to get out in my opinion. with worldwide recession we will probably see a snapback in commodoties (barring a war in Iran), and likely negative inflation in Europe.
This is not being discounted for in the exchange rate.

On the yen side, Japan will soon be in recession and when the japanese do badly they repatriate money back home. We are on the verge of a systematic banking crisis. 100s of banks are going to go bankrupt and the vix will spike again very high.

It does not feel to me anymore that the pair will break 170 neccesarilly. A double top seems plausible. Do you have any long term targets of what eur/yen could go to if it breaks 170?

thanks, CH22

Hi CH22,
I fully agree with you and at least EURO is overvalued by 30% in immediate term. There is no way that EZ can afford to keep higher interest rates due to slowing economies and US is US, if they go under whole world will be frozen as they have spread their disease everywhere. Its important to note that most Asia SWF have already started buying USD in view of the forthcoming elections and outgoing Monkey president who has nothing but shame to his country in all aspects like polotical, social and economical. I am bullish on USD in medium to long term. Taa

SKS,

Thanks for the support!
I think that the USD will get a big boost when Bush goes.I am just wondering whether they will wait for him to actually go or will preempt his exit. It is fascinating how the USD peaked on Bush's inaugoration and has been falling ever since.

You might want to read a very good article by Stephen Jen out of Morgan Stanley, about unflattening the global supply chain, whereby high transport costs via high oil will make outsourcing the production process around the world unfeasible. Many people think this will help manufacturing in the US. Also it will mean that Asia's export demand led growth model will have to be reviewed and they will have to increase domestic demand, which should act to reduce the trade defecit.

ch22

Hey Warper,

Actually I already took profit. I'm following the closing wedge pretty closely and don't want to try to forecast direction and breakout as that will lower my potential for returns.

Played the small long up to 107.15 (didn't want to take the additional risk of making this a full position and adding to a trade over the weekend) and took profit.

Tempted to keep trading the range, but the potential for returns is thinning out with the wedge and the probability of a breakout is rising.

Unless something really pops out at me on the short-term for a range trade, I will probably just hold off for the inevitable breakout.

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It certainly is herd mentality, and probably more than that. Investors are still trying to stick with 'sure' investments in a market that is prone to volatility and liquidity problems. The euro has been there for a long-time; and trading with the trend has the highest probability for return (contrarian traders only make money in 5-15% of the markets).

However, I too think the euro is going to suffer from the global economic slow down just like everyone else - it's just a matter of time (Pimco's Bill Gross says its some 30% overvalued). However, as you suggest the Japanese economy is hurting as well; so that kind of reduces the fundamental outlook for a major EURJPY reversal.

Then you have to throw in their the threat of overall risk trends and whether or not they will revive their correlation to the carry trade. Freddie and Fannie are a big issue as are second quarter earnings. If all these analysts' calls for hundreds of bank failures (just saw that RBS was projecting a few hundred) come true, the already fragile credit market will probably freeze of again despite the efforts made by the Fed to ensure credit lines.

Actually, i think perhaps the biggest driver of the yen is the japanese real accounts. As the Japanese recession becomes more severe, they will be forced to repatriate foreign holdings back into yen. I think that is the key thing to keep in mind.

As for the FEDs measures to address the credit issues, they are trying to use liquidity measures to solve insolvency. If they dont nationalise the mortgages, the financial system will implode.
You can download Roubini's podcast on www.bloomberg.com for a more sophisticated analysis of the situation

Ah! That explains why I'm not in the super-rich club!
Must try to be like normal people

But seriously, dollar/yen is pulling back to the channel line as expected. Important to see a pivotal change (reversal), today being 15th. I will close yesterday's short from 106.65 if the 61.8% level keeps holding, because obviously the traders are not risking selling the pair down further. 105.89 is todays expectation before a reversal. However, you must trade what is happening so a break lower could occur.