Forex Investment and Currency Trading

YEN 1 – 3 Month Outlook
JPY was the third worst performing G10 currency (after NZD and CAD) through the course of June, with USD/JPY hitting a succession of three months highs and EUR/JPY hitting a new record high before correcting somewhat lower at the tail end of the month. In part, JPY weakness seems to reflect the currency adopting the role of “path of least resistance” for USD appreciation in the way EUR did when USD was falling. USD’s appreciation since March has in part reflected the increasingly hawkish stance of the Fed and this has been almost matched by [...]

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Stocks: One of the big reasons to be bullish stocks lately has been the enormous stash of cash on the sidelines, a byproduct of the raging fear in the markets from January to March. But if this massive flood of money is lurking, should we not have seen a big rise in volume as the market broke through the unanimously important 1400 / 1405 level in the S+P? The fact is, volumes on the rally have been pathetic and it seems that the cash on the sidelines is not being aggressively put to work and therefore what we are seeing [...]

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Positioning now favors further yen appreciation toward 90 vs the USD once the 95.77 yen-high is broken.
Japanese retail investors have been raising foreign currency assets mainly through investment trusts and FX margin accounts. Their typical trading pattern has been contrarian i.e. they buy foreign currencies when the yen appreciates, and sell them when the yen depreciates, but over time they have accumulated a stock of foreign currency assets. Long-term Yen domestic carry traders are still broadly un-hedged. If USD/JPY and other yen crosses keep falling, they may begin to hedge long term positions.
Margin trading companies usually request clients to use [...]

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USD/JPY – Resistance at 101.82 is expected to stall retracements for a return to the low at 95.88.
USD/JPY began a retracement phase last week after valuations reached oversold levels. With the recovery above 100.00 returning the daily studies to more neutral levels, resistance at 101.82 (close to 50% Fibonacci retracement of the February-March decline at 102.23) is expected to attract renewed selling interest for an attempt to take out initial support at 98.53. This outcome would validate the bearish view, projecting a return to the cyclical low at 95.88. 96.00 is viewed as a price target.

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The JPY was modestly softer against major currencies, with USD/JPY and GBP/JPY apparently forming triangles. The JGB yield curve flattened, with the 2-year sector constrained by hedge selling ahead of Tuesday’s auction. Nationwide supermarket sales gained by 1.9% yoy in Febraury after falling by 1.7% yoy in January, aided by the leap year day. The official land price report revealed that the nationwide land price average gained by 1.7% during the year to January 1, accelerating from the 0.4% gain in the previous year. However, the near-term economic outlook is deteriorating. The Cabinet Office/MoF business survey reported that the Business [...]

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