USDJPY short based on market reflex
This trade is not primarily based on technical analysis, although it serves as a support for the position overall.
It's my opinion that the very recent performance of the dollar is based on trailing economic data that does not accurately reflect a disparity between the Yen and the Dollar. It is primarily based on modestly positive economic data and the intention of the federal reserve to raise interest rates, which in my opinion will not be as dramatic as expected. The sensible notion that the spot rate would be based on the relative difference of factors that influence exchange rates seems to have little relevance. It is related to the notion of market's being intrinsically "right". However to me, this is equivalent to saying expectations are equivalent to reality.
To me the current situation represents a disparity between expectations, and reality. Conventional wisdom would tell us that, due to interest rate differentials the yen has weakened, but we do not see any significant change or decrease in foreign investment overall in Japan. This almost unequivocally the reason provided for the Yen's devaluation. It is largely speculation based on expectation. The reality is that while the Yen has devalued immensely, Japanese companies are posting very high earnings as a result, far superior to US companies. The main point of weakness is commodity prices, as Japan must import far more materials than a country like the US, which is the primary cause for a less rosy print of figures like CPI in Japan, making the trader or investor nervous, and "risk off". Japanese inflation is also below 3 percent, when compared to figures like 8 percent seen in the US and elsewhere in the world. It is nonsensical to view the situation in the US markets far better than that of Japan. As one example Japan's ultra lose policy will allow it's economy to recover further, in contrast the damage caused by higher interest rates in the US and elsewhere.
Speculation that has gone against Japan, has secured it's future success that will allow for greater free cashflows, superior earnings, and credit availability compared other major economies. Greater foreign investment will also increase the attractiveness of the yen and further attract speculation in shorting USDJPY. The dollar's strength rest upon a broken staff in comparison. The current position is the highest potential turning point in the market to take a short position, patience was needed in order to reach this entry point.
Trade timeframe is approximately 4-6 months.
It's my opinion that the very recent performance of the dollar is based on trailing economic data that does not accurately reflect a disparity between the Yen and the Dollar. It is primarily based on modestly positive economic data and the intention of the federal reserve to raise interest rates, which in my opinion will not be as dramatic as expected. The sensible notion that the spot rate would be based on the relative difference of factors that influence exchange rates seems to have little relevance. It is related to the notion of market's being intrinsically "right". However to me, this is equivalent to saying expectations are equivalent to reality.
To me the current situation represents a disparity between expectations, and reality. Conventional wisdom would tell us that, due to interest rate differentials the yen has weakened, but we do not see any significant change or decrease in foreign investment overall in Japan. This almost unequivocally the reason provided for the Yen's devaluation. It is largely speculation based on expectation. The reality is that while the Yen has devalued immensely, Japanese companies are posting very high earnings as a result, far superior to US companies. The main point of weakness is commodity prices, as Japan must import far more materials than a country like the US, which is the primary cause for a less rosy print of figures like CPI in Japan, making the trader or investor nervous, and "risk off". Japanese inflation is also below 3 percent, when compared to figures like 8 percent seen in the US and elsewhere in the world. It is nonsensical to view the situation in the US markets far better than that of Japan. As one example Japan's ultra lose policy will allow it's economy to recover further, in contrast the damage caused by higher interest rates in the US and elsewhere.
Speculation that has gone against Japan, has secured it's future success that will allow for greater free cashflows, superior earnings, and credit availability compared other major economies. Greater foreign investment will also increase the attractiveness of the yen and further attract speculation in shorting USDJPY. The dollar's strength rest upon a broken staff in comparison. The current position is the highest potential turning point in the market to take a short position, patience was needed in order to reach this entry point.
Trade timeframe is approximately 4-6 months.
Comment:
Initial short entry closed at 136.256. Risk of classic bull wedge formation and Federal Reserve polices. Awaiting re-entry.
Comment:
Short re-entry at 136.878
Order cancelled:
Stop entry set, trading range is clouding my judgement.