trading JPY

Japanese Stocks – JPY Correlation

Forex Kong 15 Comments

The typical correlation between the value of a given markets equities, and the value of its local currency is pretty well illustrated here. The Nikkei has come along way – and as I expect JPY to take a bounce, one can only assume it’s likely time for a correction in Japanese stocks as well.

The chart below is weekly – and the horizontal line of support and resistance should be drawn with a “crayola crayon” not a laser pointer. When viewing a weekly chart one has to keep in mind that a “turn” doesn’t happen overnight. Imagine even one or two more candles tucked up there around these price levels  – and you’re already looking out to mid April.

Nikkei Close To Correction

Nikkei Close To Correction

At times  – some of my trades take weeks to develop, and then even longer to pay off ( all be it… pay off well ). For those seeking “instant gratification” when trading foreign exchange – perhaps you’ll need to look elsewhere.

Finding the opportunities is one thing – being able to effectively trade them is another.

It’s been a real grind sideways in the majority of the JPY pairs over the past couple weeks, and the trade has tested me on several occasions. With volatility at extremes and a lack of clarity in market direction – JPY certainly hasn’t “taken off for the moon” on this expected move higher. As outlined in the chart above – the probability of a substancial move remains. 

Trading JPY – When Short Turns Long

Forex Kong 24 Comments

If you’ve been trading the Japanese Yen (JPY) alongside me these past few months,  I’m sure that you agree….the currency has been a real friend. The steep and steady slide of JPY over the past few months has made for some excellent trade opportunities – for that I am thankful.

Once you’ve tracked and traded a currency this tight, for an extended period of time – you really start to get a feel for its movements. What time of the day holds action, when to sit out, when to step on the gas, or when to sit back and enjoy the ride. By now you’ve got 8 million horizontal lines of support and resistance drawn at levels you’ve now come to know in your sleep. You are now….one with Yen!

As we know nothing moves in a straight line, and no currency exists in a vacuum so….at some point the tides change and your “easy ride down” morphs into some “bumpy days sideways” until finally a correction “upward” is due.

Taking into consideration that JPY is still very much so considered a safe haven currency (as we’ve been over  – with Japan holding the majority of its debt domestically), coupled with current fundamentals shifting  “towards” risk off behavior I feel the time is coming very soon to flip this one upside down – and start looking LONG JPY.

For me this would manifest in taking “short positions” in AUD/JPY, NZD/JPY,CAD/JPY and possibly several others as markets continue across the top before making their move lower.

Bernanke is on deck for Wednesday with the FOMC minutes being released so…I imagine he’ll want to talk it up that QE is right on track and set to continue. This along with the current fluster of information out of the EU Zone makes for a pretty tricky couple days. I will be monitoring and watching all my previously drawn lines of S/R as they will all just get hit again on the upside.

In this case I am considering that buying JPY will align with “risk off coming into markets” for those of you looking to line up the fundamentals. JPY is a safe haven and is likely “bought” in times of risk aversion.

Currency Wars – Japan Turns Up Heat

Forex Kong 11 Comments

This is getting really interesting.

Getting this right could provide some of the absolute best trade opportunities of 2013. I plan to take full advantage. Considering that I expect the coming year to be extremely difficult to trade (and a real minefield for those with little experience) focusing on “what works” will be essential for survival.

As I’d mentioned in a previous article, the dynamics surrounding the U.S Fed’s plans to “print their way out of debt” and the dynamics of Japan’s recent foray into the “monetary easing business” are very different – and well worth pointing out.

Bottomline – Japan’s public debt is predominantly domestically owned (95% is owned by Japan’s own citizens) while the U.S owes more than 50% of its debt to foreigners. Japan’s printing will have little ramifications (globally speaking) and essentially they can print forever – managing  this domestically, with almost no risk of default.

Sooner or later holders of  U.S debt are going to get extremely “choked” as the dollar denominated paper they own is driven into the ground…and worth less and less and less…….

Japanese Economic Story – Trading The Yen

A quick look at a long term weekly chart of the AUD/JPY.

Forex_Kong_Currency_Trading

Forex_Kong_Currency_Trading

The recent monetary policy shifts/ implications out of Japan are a game changer if you ask me – and will likely be cornerstone to my trading plans moving forward. Eventually (as well with consideration of “eventual” rising interest rates in America) the U.S game will come to an end. It’s gonna be messy, and it’s gonna be tricky to trade.

The Yen (at least for now) appears to have a much clearer path on its road to “devaluation” than the USD – as the currency wars are now really starting to heat up. Opportunity will be found shorting both, but the fundamentals suggest that the Yen may provide an easier path to profit.

Japanese Economic Story – Trading The Yen

Forex Kong 5 Comments

I am fascinated by Japan’s economic story – and an absolutely huge fan of trading the Japanese Yen (JPY). In fact, I would attribute the majority of my trading profits over the past few years to trades involving the Yen vs the commodity currencies. The moves are usually quite large, and more importantly for me –  the fundamental story keeps me on the right side of the trade.

Japan’s monetary policy is extremely accommodative and “quantitative easing” is more or less a mainstay. 

The Japanese model is well worth studying, as it serves well as a possible pre cursor to what the Americans may soon expect to see – as a result of their “more than accommodative” monetary policy. Some economists project that the U.S is headed down the exact same path as Japan – and advise that the end result may not be exactly…….what’s desired.

Japan’s debt to GDP ratio is now well over 200% if you can get your head wrapped around that. Interestingly (very interestingly) only 5 % of that debt is held by foreign countries, while around 50% of the U.S debt is currently held by foreign countries. This is where things get interesting.

Japan’s conservative Liberal Democratic Party (LDP) is on track for a stunning victory in Monday’s election, returning to power with hawkish former Prime Minister Shinzo Abe at the helm.

An LDP win would usher in a government committed to a tough stance in a territorial row with China, a pro-nuclear power energy policy despite last year’s Fukushima disaster, and a radical recipe of hyper-easy monetary policy and big fiscal spending to end persistent deflation and tame a strong yen.

Short term I see the Yen sitting at a well-known level of support and in all would favor a bounce here, but with the election panning out as it should –  it’s safe to say that the currency wars will continue as Japan is likely be the next country announcing  further monetary stimulus and easing.

Why Watch the Japanese Yen – JPY

Forex Kong 11 Comments

The Japanese Yen is considered a safe haven currency primarily because the majority of Japan’s debt is held locally, by japanese citizens. Unlike in the Unites States where , in case of default – many countries would be at risk of loss – Japan’s debt is mostly held locally and therefore represents a higher degree of safety.

A weaker yen translates into increased competitiveness for Japanese companies overseas, since they can provide products and services their cheaper and still reap a healthy profit in yen when they repatriate their profits from abroad.

When currency traders start to see money flowing “out” of the yen – this is often a sign of “risk on” behavior, as the money is seen exiting the safe haven protection of the Yen – and likely filtering into higher risk currencies and assets.

Overnight, we’ve seen a considerable wave of Yen selling as many other currencies have made considerable ground (USD some 80 pips as well CHF for 100 pips, as well AUD , NZD and even the EUR) So keeping a close eye on the Yen can prove to be valuable indication, that a turn is near.

I am currently long USD/JPY, AUD/JPY, NZD/JPY as well long EUR/JPY – AUD/USD, NZD/USD and short USD/CAD.