Comments on: Lot of volatility in EUR/JPY so keep positions manageable

By: Nachiket

Nachiket — Mon, 17 Dec 2012 04:42:36 +0000

You call it fiscal cliff, I call it fiscal shit. its fallen from the cliff long time back and now is total shit

By: Sean Lee

Sean Lee — Mon, 17 Dec 2012 02:24:53 +0000

These CTAs and hedge funds will want to book profits before the year ends in order to try and save an otherwise bad year. Once it turns south they’ll all start bailing out, as usual.

By: fxgai

fxgai — Mon, 17 Dec 2012 02:17:21 +0000

Interesting views from Mr O’Neill last Friday as always:

“assuming [Abe] wins and moves ahead with his plans, I think we are going to Y88, possibly very soon.”

http://www.goldmansachs.com/gsam/advisors/education/viewpoints_from_chairman/viewpoints-pdfs/Q4_2012/2013-themes.pdf

He’s been talking to skeptics too, and I’m skeptical myself, but then 88 doesn’t sound impossible either, especially in thin December markets.
Still, I am bothered that US treasury yields are still well below 2%. At some stage I think the yen weakness will be unwound (assuming no rapid moves by the BoJ) unless yields start to make real moves higher. I suppose yields might move higher if the fiscal cliff stuff gets resolved? I don’t usually keep such a close eye on these correlations, but I am curious as to how long can the correlation between USD/JPY and US treasury yields stay broken. Perhaps until the market starts to focus on something other than Japanese politics. I’m not sure if Abe can say much more in the short term to keep things juiced.

By: Sean Lee

Sean Lee — Sun, 16 Dec 2012 23:46:15 +0000

Thanks mate, invaluable as always

By: fxgai

fxgai — Sun, 16 Dec 2012 23:17:14 +0000

you rang 🙂
I am no expert myself but getting the two thirds should aid law making. It’s possibly now a question of whether Abe will tone down a little that he has responsibility. I don’t think the boj is about to turn on the printing presses tomorrow either so in the short term there is a good chance we see the highs of the year in the next day or two before we shutdown until next year? Then again after Christmas perhaps the hedge funds will start plunging back into the yen shorts, who knows… Sticking to small positions being wise is about the only thing I am sure of!

By: Jason Jin

Jason Jin — Sun, 16 Dec 2012 22:59:16 +0000

I totally agree with you on the positioning and I also think sell on silly rallies is a sensible strategy. I just want get more insights on the japan politics.

By: Sean Lee

Sean Lee — Sun, 16 Dec 2012 22:51:53 +0000

I’m not an expert on Japanese politics, we will have to wait until fxgai turns up, but this sort of talk isn’t new and I’ve heard similar plans many times over the last 10 years in order to try and beat deflation. Even if it ‘only’ takes 6 months to get the laws through, they will be watered down and speccys cannot sit that long on their positions. If the mkt is already very long, USD/JPY will start falling soon imho (but I’ve been very wrong before Jason 🙂 )

By: Jason Jin

Jason Jin — Sun, 16 Dec 2012 22:46:56 +0000

I thought they have 320+ seats so they could create new laws much quicker? Isn’t that what this is all about? The market gets what they want. Are you saying even with such a big advantage, this still could take 2 years?

By: Sean Lee

Sean Lee — Sun, 16 Dec 2012 22:44:19 +0000

Yes Jason, but it could take 2 years for Japanese parliament to agree on, and approve necessary measures? Hedge funds are limit long in some cases so once there are no buyers left then the profit-taking and trailing-stop-chasing will begin, no matter what the long term fundamental picture is. That’s my view at least

By: Jason Jin

Jason Jin — Sun, 16 Dec 2012 22:38:34 +0000

Sean, I am a bit confused. Why do think this is a silly level? Because if market thinks about BOJ unlimited easing, then USD/JPY could go to 90. By that argument, the current level is cheap.