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USD/JPY: Still feels like we could get a silly spike to 110+

I don’t have a position in USD/JPY at the moment and therefore my opinion should carry less weight but for what it’s worth, it feels to me that we may get a sharp spike sometime very soon. This will probably take out technical resistance at 105.50 but my trade of the year is still to sell a failure near 110.50/111.00 for a move back to 90.

If you can get on to this move up to 110, then good luck to you, but I don’t have the patience or energy to ‘nurse’ a long USD/JPY position at the moment.

  1. The obvious one is some political change in Japan, and we’ve certainly had plenty of those over the years. Change in policy could lead to massive buy-back of Yen shorts??

  2. Sub 95 is definitely possible this year if something goes amiss (not my base case scenario though).

    Most of the USD/JPY move since late 2012 has been driven by speculators. and there are no profits for speculators who don’t close their winning trades, so eventually they will take profits and buy back yen, for whatever reason. Will there be enough dip buyers to hold it up? is the question.

    Right now PM Abe looks very stable in his position – there hasn’t been a Japanese PM with ratings as high as his for longer than I can remember. Most of his recent predecessors (including him in his first term) were gone after a year. But his ratings remain high, around 60% apparently.

    Still, Abe might decide to turn back on Japan’s nuclear power plants at some stage, which could flip Japan’s recent trade balance deficits back to surpluses. This is a possible surprise factor, something to watch I think. Bad stuff happening somewhere in the rest of the world may also force the specs to close their USD/JPY longs to offset losses elsewhere.

  3. wonderful.

    for the nuclear power parts, I would thought it’s good for USD/JPY as it solve energy issue better for Nikki corporations.



  4. Mike, that’s an angle I hadn’t thought of, cheaper energy might boost the Nikkei and be a risk-on factor… How it plays out with reduced outflows of JPY will be something to watch.

    Sean Lee, just my boots on the ground views. I hate the lack of fiscal discipline here in Japan, these guys make the Greeks look like Uncle Scrooge. No sense of crisis anywhere. Maybe that’s why the party is able to keep rolling on!

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