USDYEN next?

Published on: October 14th, 2017

FX has been on the mind of our contributors as of late and Julian is getting interested in USD/JPY. Find out the Why, What and When.

Comments

  • jm
    joeri m.
    16 October 2017 @ 11:09
    I am not convinced about the fundamental reasons for the JPY to decline in value simply because the fed is tightening. December 2015, the fed raises interest rates. At the beginning of 2016, the BoJ goes negative with its interest rate. Fundamentally the yen should decline. However, the opposite happened. Why would fed tightening now lead to a weaker yen when at the beginning of 2016 the yen increased even when the BoJ went negative? I guess it is because long term yields in the us declined in the first half of 2016. What do you guys think? Thanks
    • jm
      joeri m.
      16 October 2017 @ 13:46
      It also seems that there was a large long position in the yen at the beginning of 2016. This should have been another reason for the yen to decline, however it didn't happen.
    • GS
      George S.
      30 October 2017 @ 18:53
      Watch Russell Clark interview on RVTV to understand more about how Yen flows work. Above anything else JPY is a risk on/off indicator because of the net external asset position of Japan, which is by far the largest - 2x that of Germany (2nd largest). Given that there is no yield in Japan, during risk on all that JPY spills into the world. When sh*t hits the fan (like at the end of 2015 and start of 2016) the flows go the other way around. JPY is always the best performing fx in strong drawdowns and Japanese equity performs much worse than other developed.
  • PG
    Paul G.
    26 October 2017 @ 00:33
    China seems to increasingly resembling Russia (present - Putin/ Xi) and past (around the Russian default). Is it just me? or have others noted the similarities as well?
  • AD
    Alexander D.
    21 October 2017 @ 08:13
    Is anyone still long GDX or GLD? Looks like a potential breakdown coming soon. Any thoughts on this former trade idea?
    • SR
      Steve R.
      22 October 2017 @ 21:07
      Personally I don't think having a gold position in one form or another is a problem at this stage. If nothing else its a good hedge for any potential Black Swan event. The long term prospects for gold are good, so unless you have an over-sized or over-leveraged position in gold I don't think its anything to be concerned about. I have gold exposure but expect the price to fall in the short term, but I'm not at all worried about it.
  • gg
    gurdeep g.
    14 October 2017 @ 14:37
    How does this fit in with your gold view Julian?
    • dm
      daryl m.
      16 October 2017 @ 08:30
      I agree good question for Julian. Gold should decline as outlined by Steve R. Not sure where Peter Brandt gave his 2018 Q1 - Q2 bottom forecast for gold.
    • WD
      Wim D.
      17 October 2017 @ 12:54
      Agree USDJPY 1,2 could provide us a nice bottom in gold(miners)
  • JV
    Jason V.
    16 October 2017 @ 02:13
    Excellent from start to finish. The insight into the trade construction process (fundamentals, positioning, technicals) is immensely valuable. Presents the trade idea in its full context, which adds weight and conviction to the case. Also, it should be mentioned that Julian's firm, MI2 Partners, has a particular expertise in all things Japan related, which further adds credence to this JPY trade.
  • MM
    Michael M.
    15 October 2017 @ 17:00
    This was written on 10/12/17 and posted here as dated the 10/14/17. The CPI release on 10/13/17 seemed to be an impactful event in that (together with Fed minute scratching of the head) seemed to reduce expectations of inflation which resulted in a Friday fall in Treasury yields (and bund yields which are back to where they were a month ago), the Treasury/Bund yield spread (which is crucial to understanding the DXY movement this year) and specifically relevant here the 0.36% fall in the USD/Yen (which flattens your 15w ema) How does Friday impact this trade?
  • ca
    courage a.
    14 October 2017 @ 11:39
    Random question but does anyone know what it means to receive 1y1y GBP ? I saw that in a research note and have no idea what it means.. Any help would be appreciated
    • RT
      Richard T.
      15 October 2017 @ 08:57
      I wld take that to mean receiving 1 yr GBP interest rate swaps starting in 1 years time. The way to think about this is you are receiving 2 yr fixed rates and paying 1 yr.
  • SR
    Steve R.
    15 October 2017 @ 01:59
    I have already been looking at USDJPY recently with a similar view. I have aligned this also to the potential for Gold to move south again back towards $1200 due to the correlation between USDJPY and Gold. This also ties in with Peter Brandt's view that Gold will bottom sometime in Q1/Q2 2018, which also ties in with Julian's view of events for Q2 2018. So a number of stars seem to be aligning here (at least potentially).
  • DB
    David B.
    14 October 2017 @ 17:42
    Another option is to purchase FXY out of the money puts. As an example, there are over 6000 open contracts for the Jan 18 80’s. Perhaps one of the members with options experience will provide some insights.
  • DB
    David B.
    14 October 2017 @ 17:42
    Another option is to purchase FXY out of the money puts. As an example, there are over 6000 open contracts for the Jan 18 80’s. Perhaps one of the members with options experience will provide some insights.
  • DB
    David B.
    14 October 2017 @ 17:42
    Another option is to purchase FXY out of the money puts. As an example, there are over 6000 open contracts for the Jan 18 80’s. Perhaps one of the members with options experience will provide some insights.
  • CR
    Corey R.
    14 October 2017 @ 16:15
    Thank you Julian. Very informative piece with good rationale and charts. And I appreciate the use and explanation of the P&F charts
  • ca
    courage a.
    14 October 2017 @ 12:25
    This*
  • ca
    courage a.
    14 October 2017 @ 12:16
    With my 3 to 12month time horizon it's deffo worth putting thus trade on my watch list.