JPY crosses

I’ve got a bad feeling about these Yen crosses

Something just doesn’t smell right about these moves higher in the JPY crosses, they feel totally overdone to me and I think it’s 100% driven by speculative plays. It’s December, the month for silly moves, and I think some professional players are trying for the “Hail Mary trade” in the hope of redeeming their year.

If we get another silly exhaustive spike up towards 110.50/111.00 in EUR/JPY then I will try counter trading. If we continue to get a slow and gradual squeeze higher, then I’ll leave it alone.

  1. Feelings…
    I have a funny one toward the AUD finishing this year around 1.0200 minimum.
    I just miss last year when AUd moved 200-400 pips a day :(…

  2. Who knows Anas, it could still do so? Maybe a poor PMI number triggers stops below 10480 and gets the ball rolling?? Some of that vol would be a nice Christmas present

  3. Yes, I stopped myself out at 10525 a few days ago so it’s probably ripe for a fall 🙂 My timing has been pretty horrendous these last few months but as always its just a matter of reducing positioning and not losing anything until the tide turns my way.

  4. Gidday Sean, I think the whole thing has been completely overdone too, but there’s guys like Jim O’Neill at GSAM who’ve been talking about how they think 88 in usd/jpy is not out of the question this year etc etc. For all of that to play out it would seem to require a big decoupling of the correlation between usd/jpy and US/Japanese bond yield spreads. But last time I looked US 10 year yields were still well below 2.00%. Maybe it’s the 2 year yield spread I was supposed to be looking at, but even still to me it looks like the yen crosses are are a lot like Willy Coyote at this point… Time shall tell!
    Might be worth looking up when the next Japanese trade / current account data is set for release too.

  5. Just had a look fxgai, trade data next Wednesday morning. I know its a dangerous game trying to pick these bubbles bursting but with other risk assets starting to fall, this momentum in Yen crosses seems unsustainable

  6. Wow, thanks for that. Here I was thinking I’d have to wait till next year for a new batch of data. I just did a Google on USD/JPY and bond yield spread correlation, and spooky stuff, but I found articles dated Dec 2010 (including one with your name on it) talking about how the correlation was breaking down.

    Maybe this is something that happens at year end?

    If so, then given the tendency over time for the correlation to hold, perhaps indeed we are looking at some very attractive levels to short from. A nice fiscal cliff smash up could help such trades too. Needs some guts to take such risk at this time of year though…

  7. Yeah indeed, this time of year can be very hairy but on the flip side, if you get it right the reward can be quick. That fiscal cliff smash up like you say would certainly send it tumbling

  8. I have the same feeling.

    This year is tough for most HFs, and they are desperately trying to make some money before year ends. IMM hinted this and so interbank flow, like herds.

    I will short it and building positions, mainly EYEN

  9. Hi sean, JPY fell, in 5 years that low and you you warned me and were right. I think i have learned my lesson. positioning were small,

    Definitely small positioning helps entering market again and a gain and I am working on next entry thou I have lost a big chunk so far.

    I t smelt bad to me a long ago but being a new bee I made wrong calculations for entries but I don’t regret it as i have learned a lot in 1 year communication with you than reading the God Dam books

  10. Yen is acting very very strange….!!!! it held for 2 weeks in consolidation and them it break through it’s Multy year trend line ?????????????????????

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