Comments on: Anyone else think EUR/JPY can go to 130+

By: Iridium

Iridium — Fri, 19 Oct 2012 06:18:04 +0000

One thing more, the JPY might really get weakier more thanks to M&A by Japanese companies, but I don’t think this will create a trend, it will only be spikes…

By: Iridium

Iridium — Fri, 19 Oct 2012 06:09:46 +0000

Sean,
I just want to comment on the JPY story.
We all know that the natural trend for JPY is to strengthen over time. The BOJ is trying to give some life to the JPY bears by having some QE type of programs. Now new hopes are starting to inflate for a big QE on october 30th pushing JPY crosses higher.

My view: the debt to GDP ratio of Japan is tremendous at 200%. The yield on JGB is very low (0.8% on 10Y). Any significant money printing by the BOJ would cause inflationary pressures to rise, and bond yields to rise also. Any rise in bond yields will immediately make the debt servicing impossible. This is why Mr Shirakawa is so cautious about his money printing, and he’s injecting only minor sums of yen to avoid a debt spiral out of control. He’s printing on yearly basis what Bernanke is printing on a monthly basis.
This is why I think the markets will get disappointed again by the BOJ. The MOF is in the same trap. So yes they want to ease, to weaken the yen. But no, they can’t. What they’ll will do will be not enough. Things need to get much uglier before the USDJPY goes above 100 and EURJPY above 130 (if the Euro still exists by that time :-))

By: pandu

pandu — Fri, 19 Oct 2012 06:03:11 +0000

Well, I think so too. There is strong resistance near 108 and we may see a retracement back to 99-100 from 108. Once that reverses and heads back to 108, the picture becomes very bullish. The final target is around 132, the 50% Fibo of the big move on the weekly. Of course it won’t get there in a straight line and it will probably take a year. So this is an interesting insight but not really tradeable info.