Horrible data out of Japan last night has indeed “capped” the recent move higher, but more importantly has “put a stop to further easing” til at least October, if not til early 2015!
The weakened Yen has pushed inflation higher as import costs on food and energy continue to rise. This is absolutely fantastic news for us , as it removes “yet another Central Bank” ( if indeed the Fed has stepped back at all – which I really don’t believe they have ) and opens the window for some “serious” medium term planning.
No BOJ printing til maybe even 2015? Fed looking to continue tapering? ECB more or less caught like a deer in the headlights? Hello! Contraction time is coming!
Trade wise, this could be a real break as we all know what it feels like “week after week” with markets hanging on every single word from Central Banks. More easing ? Less easing? Ping pong, ping-pong. The message is starting to come clear that the “easy money” is most certainly going to slow.
Strength in JPY has slowing been building since the beginning of the year, as the big boys quietly build for the entire first five months of 2014. Wow.
Yen_2014_Forex_Kong
The market has been an absolute grind the first half of 2014 – and for very good reason. When major shifts in monetary policy loom in the “not so distant future” major market players start making “major market moves”. This takes time. A lot of time. So much time that you’d have to imagine a plan being put in place back in January and “only now” getting closer to a time to see it realized.
Has the “extended down period” in Gold been any different? Absolutely not. Big boys getting into position for the turn. Takes months. Many months, as they can’t move price “to fast” in that they essentially move prices “against themselves” with plans to buy in such quantity that when the time “finally comes” they are “so loaded” it rains money for the following year. This is how it’s done.
When I say patience is required. I don’t mean sitting on your ass waiting for something to happen. I mean working your ass off getting into position “before” something happens.
This is how it’s done. Come check us out at the Members Site…you might actually learn something. www.forexkong.net
The Smart Money Positioning: Reading Between the Lines
When institutional money starts moving, it doesn’t announce itself with fanfare. It whispers through volume spikes at odd hours, through subtle shifts in currency correlations, and through the kind of grinding price action that drives retail traders absolutely insane. What we’re seeing in JPY right now is textbook institutional accumulation – the same pattern that preceded every major currency reversal of the past decade.
The beauty of this setup lies in its fundamentals. Japan’s inflation data isn’t just bad – it’s strategically inconvenient for the BOJ. They’ve painted themselves into a corner where further easing would only accelerate the very problem they’re trying to solve. Import costs are crushing Japanese consumers, and more Yen debasement isn’t the answer anymore. This creates a perfect storm where monetary policy divergence finally works in our favor.
Central Bank Checkmate: When Policy Tools Break Down
Here’s what the mainstream financial media isn’t telling you: we’re witnessing the breakdown of coordinated central bank intervention. For years, these institutions moved in lockstep, creating artificial market conditions that made traditional analysis nearly worthless. Now? The BOJ is trapped, the Fed is pretending they have an exit strategy, and the ECB is still playing catch-up to a crisis that started years ago.
This isn’t just about Japan. When one major central bank steps back from the easing game, it creates ripple effects across all currency pairs. The USD weakness we’ve been anticipating becomes inevitable when the competitive devaluation game finally ends. Smart money knows this, which is exactly why they’ve been positioning for months.
The Gold Connection: Precious Metals Signal the Turn
Gold’s extended consolidation isn’t random market noise – it’s institutional accumulation disguised as retail boredom. The same forces driving JPY strength are building pressure under precious metals. When central banks lose credibility, when inflation becomes uncontrollable through traditional means, when currency wars reach their logical conclusion, gold becomes the ultimate beneficiary.
The correlation between JPY strength and gold accumulation isn’t coincidental. Both represent a flight from the coordinated currency manipulation that’s defined markets since 2008. Both signal that the era of unlimited central bank intervention is coming to an end. The metal moves we’re anticipating will coincide perfectly with the JPY breakout that’s building.
Timing the Breakout: October’s Critical Window
October represents a critical inflection point. If the BOJ maintains their hawkish stance through their next policy meeting, we’re looking at a fundamental shift in global currency dynamics. The technical setup in USDJPY is already screaming reversal – we’re seeing classic topping patterns, divergences in momentum indicators, and the kind of volume characteristics that precede major moves.
But here’s the key: this isn’t a trade you can day-trade or scalp. Institutional money moves in quarterly cycles, not hourly timeframes. The smart money that’s been accumulating JPY since January isn’t looking for quick profits – they’re positioning for a multi-month trend that could redefine currency relationships.
The Bigger Picture: Currency Wars End Game
What we’re witnessing goes beyond individual currency pairs. This is the beginning of the end for the post-2008 monetary experiment. When competitive devaluation stops working, when import inflation becomes politically toxic, when central banks run out of credible policy tools, the entire framework shifts.
The JPY strength building since January isn’t just about Japan – it’s about the global rebalancing that must occur when artificial currency suppression finally breaks down. The institutions loading up on Yen aren’t betting on Japan’s economy. They’re betting against the sustainability of coordinated global money printing.
This is why patience isn’t just recommended – it’s mandatory. The setup we’re seeing unfold took months to develop and will take months to fully realize. But when it does, the profits won’t come in pips. They’ll come in paradigm shifts that create generational wealth for those positioned correctly.
Great post Kong. Thanks a lot for the bigger picture guidance.
Stil hoping readers get it.
I doubt it but…….there’s always hope.
Kong, would you please elaborate on this affecting Gold and gold stocks? If a move higher, will it be a mirror move till early 2015? Thanks!
What I’m suggesting is that when you see such long drawn out periods of “accumulation” you know price is “eventually” going higher.
In the case of Yen / JPY that “eventually” is pretty much here.
In gold’s case…..getting closer but it could just as easily wallow another couple months here.
Thanks a lot! That means $USD going down as carry trade unwinds. I am wondering what could be the timeframe on this trade, about 10 months?
We’ll know here very, very soon “if” indeed “the low is in for USD” – and if that’s the case……..there’s miles to go.
BUT……
Making any kind of long term trade plans in today’s day and age is really a fools game. You’ve got to roll with the punches as “a typical retracement” these days….generally means retracing 100% of the prior move.
If USD has indeed put in what I’d consider a ” 3 year low” then man…it’s an amazing turn to catch / participate in
BUT……
It’s not a single days “entry and you’re golden” – not a chance.
You’ll need to book profits when you see them…and continue to stay “very active and attentive”.
In generally though……I’d NOT want to be a “stuck a Bull” – for the latter half of 2014 early 2015 no.