Tuesday, August 30, 2016

Long Yen trades a problem

Long Yen trades a problem
For sometime the FX market has been overly long yen positions for a number of reasons, source of funding for carry trades and for risk aversion purposes. With the BoJ’s back against the wall, the long yen trade looked appealing.
A ‘hawkish’ Fed and a ‘dovish’ Kuroda at last weekend’s Jackson Hole has been pressurizing these ‘weaker’ longs (¥102.33). Overnight, the yen ‘bear’ got further support from PM Abe’s advisor Hamada – he called on the Finance Ministry to “courageously” intervene in FX markets to stem the yen’s appreciation, accusing the MOF of lost credibility on exchange rate. The response is that cabinet is closely watching FX markets and prepared to respond appropriately.
Currently, the market consensus is leaning towards the Bank of Japan (BoJ) favoring deeper negative interest rates at next months monetary policy meeting (September 20).
•USD/JPY has posted slight gains in the Asian and European sessions
•102.36 was tested in resistance earlier and is a weak line
•101.20 is providing support
•Current range:101.20 to 102.36
Further levels in both directions:
•Below: 101.20, 99.71, 98.95 and 97.78
• Above: 102.36, 103.73 and 104.99
USD/JPY ratio is showing little movement on Tuesday. Currently, long positions have a strong majority (69%), indicative of trader bias towards USD/JPY continuing to move to higher ground.