Hmm, you know I think its bond yields, especially the differentials between US treasuries and JGBs, is the money flow indicator to watch these days for USDJPY. Its not really a carry trade pair anymore, so there's less of the short term trades for overnight rates which react to equities and other high risk assets in the short term. There's been some talk that JGB yields have been rising with the doubt about funding the stimulus package that has been announced in Japan. The same is true for the USD, but its more of a long term issue for Treasuries. Japan is in worse shape for public financing, so its likely to start impacting their yields sooner. The result would be incentive to cash out Treasuries and hold JGBs. That might be a influence for the resistance we are seeing up here in the 99-102 zone. If Treasuries were purchased down in the low 90s or 80s, then its a good deal to cash out just in terms of the FX gains.

But, it still seems to me JPY should weaken further this year, especially if there's the sentiment of some economic improvement -- or at least stability. Investors would assume Japan will improve only as a result of improvement abroad in their export markets. So it would make sense to send money overseas to capture the coming rally there and then bring the money back home when its reaches Japan. I think we'll see a break of the 61.8% long term fib and move above 102, then stabilization above 100, though I'm iffy about the upside after that. 104/105? 76.4% fib sits at 105.10ish, so that could put the breaks on the rally. It would depend on how the global recession plays out.

Does any of that make sense?

It makes some sense, but it is not how I view the world. I am sure you have more Forex experience than I do, and you have made some great points on the JPY over the last few months. The yield differential between the US and Japan on the 10 year are pretty wide and I would be surprised if they were to narrow much.

I still maintain that all of the U.S. governments alphabet soup of programs cannot put humpty dumpty back together again. There is a world wide over capacity of auto manufacturing and Japan cannot easily replace that U.S. demand unless they were to export to emerging markets economies. Their economy is simply too dependent on autos and the U.S. consumer.

I just cannot see why anyone would want to put a nickel in Japan other than a repeat of the sheer panic that gripped the markets last year.

The U.S. has taken the worst case scenarios off the table with all of their programs. The debt they are taking on caps possible USD gains against more fiscally responsible countries like Australia. So I see the carry trade working against both the JPY and USD. But Japan already has debt as a percentage of GDP at over 200%. It will probably take the U.S. another year or two to get to those levels. Then we too can be an exporting country and a funding currency for the carry trade to perhaps, India, China?

I am very bearish the economy as well, though, and I am not really expecting a recovery to sustain an equity rally. But I am coming to the conclusion that the world economy will be stabilized this year, as stimulus money gets dispersed in US and Japan. Employment losses will slow, world trade will recover some, etc. Then investors will get more bullish anticipating growth ahead ... which is not likely to materialize. Then the equity markets will sell off again and drive money into the hands of government debt markets. It will more and more be a fixed income investment world with narrowing yield differentials. Equity markets will become less and less relevant to FX rates, simply because they don't represent enough volume of transactions compared to other money flows.

So I'm basically trading on the assumption Japanese fixed income money will favor the good yielders (AUDJPY, NZDJPY) and be wishy-washy about the low yielders (USDJPY, EURJPY, and CHFJPY). GBPJPY is a little strange to me. It must just be money getting out of EUR right now. I am getting skeptical about all the talk GBP is going rip and go to 160. GBP has no yield so, once the rebalancing out of EUR is done, I wonder what will drive further rallies for the GBP. We keep seeing this seesaw between those two. I guess EUR will stay weak so long as investors think they are going to have a bank crisis yet. So I'm long GBPJPY as well for an extension, but not sure how far it will go.

I almost agree word for word. I am following the same play book as you only I think a stock market rally to DJIA 10,000 is possible before a rollover.

Regarding the GBP I have stayed away from trying to short that currency for four reasons. They currency has had a huge decline. There is a commodities component to the currency and commodities have rallied to some degree. The COT report and SSI show bearishness. And finally the U.S. has taken many steps to stem the financial crisis like removing mark to market, and I expected a spill over effect in U.K. financials from the good news in U.S. financials. I will watch for sentiment changes before trying to short the pound.

For the moment investors have largely forgotten about Eastern Europe and the banking crisis in Europe. They are ignoring the political risk from Russia, so I agree the banks are severly impaired.

And yes, I fear that the Obama administration will make government securities very attractive while crushing demand for U.S. equities. It is a whole new landscape.

George Soros described the stock market recovory as an inverted square root. This is the 1938 1939 scenario for the stock market which seems highly likely. A strong rally, followed by new lows, maybe DJIA 5000 then sideways action for five years or more.

George Soros is a bear, he profits from people who believe him.. He loves to talk the economy down.. I personally believe investors won't really listen to him next time round, as he has/is losing all credibility..

No, he isn't a bear per se. George Soros's funds, even in 2008, take on both long and short positions across asset classes, including equities. There have been many times over the years, for instance, when his fund has taken highy leveraged long positions in global stocks.

As for him not being a credible source? Well, take a look at his investment record over the past four decades before making such statements, as it is nothing short of phenomenal. His understanding of the global economy and its inter-connectivity is also breathtaking.

I was lucky enough to hear him talk in London a couple of weeks ago and the auditorium was full to capacity over an hour before the start of his presentation with journalists, academics and finance professionals alike, all of whom were eager to hear his latest thoughts.

__________________
When the facts change, I change my mind. What do you do, sir?

John Maynard Keynes

I read one of his first books. It was very poorly written and I was unable to understand his thinking at all, but maybe it was just way over my head at the time as I knew zero about currencies. Still sometimes I think these people are operating on a different plane from the rest of us and only they know what the hell they are talking about in their own little world.

But yes, you cannot argue with his ability to make billions off of billions and to do that you have to have an incredible grasp of macro events that shape the world.

And a lot of these guys are just early. Look at Jim Rogers for instance. He became very bullish on commodities I think in 1998. He has been trashing the stock market for the last decade. And here we are, back at 1998 levels. A decade of returns have been wiped off the map.

Then there is Bill Gross the Bond King. He called for DJIA 5K a few years back. He will probably end up being right too, but had you followed his advice for the short term you would have been crushed as the DJIA went to 14K.

I've read two of his books, both of which were sometimes a struggle to fully grasp what he was trying to explain. At times he does seem to lose himself in his own thoughts.

It should be remembered that George Soros's original ambition was to be a philosopher not an investor, but his inability to conclusively articulate his theories on paper prevented him from pursuing his chosen career. However, when interviewed in the media, either newspapers or television, he is able to explain his thoughts more clearly. I particularly like his thoughts on reflexivity in the financial markets and how it helps both inflate and burst asset bubbles, a theory which is particularly apt at this point in time. He also wrote a brilliant piece on the CDS market at the start of this year.

George Soros has been badly wrong or early on many occasions but he seems to have the ability to recognise his error of judgements quicker than most and exit losing positions accordingly.

__________________
When the facts change, I change my mind. What do you do, sir?

John Maynard Keynes

market feels like its shhort and being squeezed higher by lack of a dow / s&P pullback.....

could easily pop higher today i like being long around 99.00-99.30 sl around 98.8

ok the 99.50 barrier that was mentioned the other day must have expired? or defense unrealistic... technically to me the target here is the falling TL that is currently just above 100, coupled with physcological resistance at 100 a break will take us well clear and target the 101.5 level


IMHO too many people are trying to trade the demise of wall street and its simply not happening, also in most other asset classes ie commoidities etc those who had to get out during oct 2008 are well out, so the 100% corealations of oct 08 are gone. I am concerned by the build up of carry in audjpy etc but i think the weak fundamentals in japan will win here. GS was calling target of 76 in AUDJPY only at 73.5 so we have a small ammount to go as an exhaustion wave. this to me could take JPY up towards 103.5 further then this and a break in the longer term downtrend will require drastic news re the japan economy... we just might get that yet as their debt levels are horible and their safe haven and carry base looks to be shifting to the USD....


play yen to the upside until wall street does crash, not in anticipation have a sell limit order in at 97.80 if it gets here its going lower !

JPY chart is still bullish as 98.25 ish held....
both technicals and fundamentals on your side here


recommend you move stops to entry from 99.20 levels to remove risk then sit back and relax.., add to trade at 100.26 level but i dont think we will get there today...



good luck trading today guys

Feels like next week this consolidation may be over and the yen weakness will resume. EURJPY and CHFJPY, which put in lower lows last night, look weaker than the others, but they should go along for the ride, just with more limited upside. Redemptions back into JPY ought to end soon and there is also the point I've heard brought up that there are large hedges sitting above these levels from the collapse last year protecting positions higher that may get taken off as JPY breaks out. That would add fuel to the fire.

Lets face the True about this currency Pair.
I hate all the talk about being bullish and bearish about the usd/jpy, eur/jpy
this is a voletie pair and i know one thing, every one want to make money
on each side of the movment.
I like to talk matematicly because, if you want to make money you have to be accurate.
Look at the comoning monday.
USD/JPY going to start at 99.06 at london time reach to 99.64 and fall back 99.17 at usd time mybe the end of the setion is going to reach 100.32
That mean tommorow be bullish usd/jpy.

Hami Abir
USD/JPY specailist

Good point.

Actually, you don't have to be accurate to make money, you just have to honest with yourself and able to understand trends. My return in the last four weeks has been 300% and I get into "bad" positions all the time. "Bad" in the since that the price doesn't do what I thought it would in a given time frame. I hedge and capture reversals and bail on the original if its obvious the trend has changed.

I traded USDJPY exclusively for a year before I moved out into the rest of the JPY crosses, so that I'd have a good "feel" for how it moves and reacts to fundamentals.

But I understand the frustration not getting specific price points in a post can be if you want to decide where to enter and exit based on what some else says. But let's face it, 95% of those predictions do not come to pass, but they may well predict the TREND accurately.