JPY And Gold – Is It Happening Now?

Consider this.

We know the Japanese stimulus program is over 3 times larger than that of the U.S Fed. Now that’s an awful lot of printing/liquidity injection coming at a time when the “U.S contribution” has pretty much run its course.

Yes the bond buying/prop plan continues in the U.S but we all know the stimulus money  more or less just sits on the balance sheets of the big banks on Wall Street. The “talk of tapering” would also have put a damper on any “impulsive buying” at this point – as we look forward to an environment where interest rates are on the rise.

As “Japanese Stimulus” is converted to U.S Dollars ( in order to buy assets denominated in USD ) we ‘ve seen “many a day” where USD is UP as well U.S Equities are higher. Makes sense right? Japanese “hot money” converted to USD to buy U.S Equities.

So what’s the “unwind” of that trade should things go to hell in a hand basket?

U.S Equities are first “sold” and USD moves considerably higher, and fast – as cash is raised. Then that “USD” is repatriated home ( converted back to the currency of its origin – in this case Japan) where we would see large flows “back into JPY”!

Gold would also move higher as USD is sold, U.S equities are sold, Japanese Equities are sold.

JPY fly’s out of orbit?

Take it for what it’s worth – I’m thinking out loud….but it doesn’t seem so difficult to get your head around. The big winners on a “risk off” trade being both JPY and Gold.

12 Responses

  1. Jworthy September 5, 2013 / 10:40 am

    Thanks Kong! That seems logical enough. And it gives us some good “signals” to watch for.
    Now I guess we sit and watch. Thanks again!

    • Forex Kong September 5, 2013 / 10:47 am

      Certainly does get a guy thinking that’s for sure.

      Nothin but non stop action here these days.

  2. robert September 5, 2013 / 11:27 am

    Daily chart on the dollar seems to show more upside in the coming days unless a riskoff event occurs.

    • Forex Kong September 5, 2013 / 11:37 am

      A deadly “up move” here this morning if not in the right pairs. USD didn’t gain an inch on either AUD NZD or CAD interestingly so…..

      As per usual “poor poor newbie EUR/USD traders” get smoked.

  3. MrT September 5, 2013 / 11:35 am

    Wait, you mean sell xxx/jpy right? I am a bit slow, sorry 🙂 Gbp/jpy was at the top of its ‘suppose to be’ Daily channel at 156.1 so according to my plan I am short…

    • Forex Kong September 5, 2013 / 11:45 am

      Nothin slow bout you man – you got it…..

      Ill be “looking” for further weakness in many /JPY pairs yes, as Nikkei still hangs at relative highs.

  4. robert September 5, 2013 / 11:51 am

    Gbpjpy is a monster as kong says… it moves regardless of anything!

    • Forex Kong September 5, 2013 / 12:07 pm

      It’s “one example” of “needing to really understand a given pairs characteristics”. In fact…it’s one of the best ( short of EUR/NZD and EUR/AUD – which I forbid you to trade ).

      Each pair has it’s own dynamics based on a number of factors, and it takes time to nail them down. Start by “observing”. I mean really observing. Get them all loaded up and start spending your time seeing ” a move in the market ” and comparing ” how it affects” each given pair in real time.

      You’ll be amazed at some of the moves you see.

  5. kevin1959 September 5, 2013 / 1:22 pm

    When do you see this happening or is there a line in the sand for usd/jpy that its not going to happen anytime soon

    • Forex Kong September 5, 2013 / 1:32 pm

      Ya Im not much for “lines in the sand” in that….every single place “you think to draw a line” – the market will draw a line 100 pips / above / below it so……..

      I stick to the fundamentals and analysis on much larger time frames…then take my short term shots, as well STAGGERING MY ENTRIES OVER TIME.

      Take USD/JPY for example. It’s moved aprox what – 40 pips against me since entry?

      Gees….that’s just “order #1!” – I could double that now…and be two days later in the move, and only down -20 pips. Then on Tuesday…..should it jump a “wopping 60 pips higher” – I’ve got enough ammo to sell it again, then again – then again!


      • kevin1959 September 5, 2013 / 3:35 pm

        Thanks for the answer. Was curious as to your thoughts. I actually only have one long JPY contract and not worried about it. I was trying to pick your brains so I can learn and try to apply what I learn to my own analysis

        Have a good day

        • Forex Kong September 5, 2013 / 3:41 pm

          There it is – nice work.

          Getting your own analysis down is half the battle. Putting enough money/balls behind it next.

          Trading small and getting familiar ( and I mean “very familiar” ) with the mechanics of it all is a great way to go, as there’s no rush right?

          Neat thing about learning how to trade. It’s a skill you can have/keep forever.

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