8 Aug 2013
USD/JPY getting slammed ahead of BOJ decision; ST support nearby at 95.88
FXstreet.com (Barcelona) - The USD/JPY continued its nearly unabated slide Wednesday as traders bet on no US tapering in September and on a more hawkish BOJ than previously thought.
Traders disregarding persistent hawkish chatter from the Fed for now
Evans, Lockhart and Fisher of the US Federal Reserve each had a turn at the microphone over the past week and each did their best to warn the global marketplace that “tapering” would be starting sooner than later – and thus to expect higher US rates and, as a by-product a higher US Dollar. With all of that jawboning by US players and a Japanese economy that is still working to generate an honest to goodness recovery (supposedly through Abenomics), the intuitive trade would be for the USD/JPY to rally (showing Dollar strength and Yen weakness). That just is not happening (yet), though.
Nobody knows for sure why the counter-intuitive move lower in the USD/JPY is occurring, but some are speculating that the intuitive trade was/is just way too crowded in the short-term. For months, strategists and portfolio managers have been talking up the long Japanese equity on the back of a lower Yen trade. When that much money gets piled up on one side of the table, the tendency is for the market to shake out the weak hands – sometimes painfully.
There IS some speculation that the Bank of Japan may not be in agreement with the dovish Abenomics policies that have been the source for so much of the strategists’ play-calling. Only proof from the BOJ itself – in their words and actions – will tell us whether that speculation is true.
USD/JPY technical outlook
While theorizing on the “why’s”, technicians are simply concerned with the price movements. Those technicians had been calling for a continued move down in the USD/JPY to the 95.88 – 96.57 target range. Even they probably did not anticipate that rang being hit this rapidly. First support now comes in at the lower edge of the projected support range at 95.88. Resistance for USD/JPY comes in at the first two meaningful pivot highs from this recent decline at 96.75 and 97.50
Traders disregarding persistent hawkish chatter from the Fed for now
Evans, Lockhart and Fisher of the US Federal Reserve each had a turn at the microphone over the past week and each did their best to warn the global marketplace that “tapering” would be starting sooner than later – and thus to expect higher US rates and, as a by-product a higher US Dollar. With all of that jawboning by US players and a Japanese economy that is still working to generate an honest to goodness recovery (supposedly through Abenomics), the intuitive trade would be for the USD/JPY to rally (showing Dollar strength and Yen weakness). That just is not happening (yet), though.
Nobody knows for sure why the counter-intuitive move lower in the USD/JPY is occurring, but some are speculating that the intuitive trade was/is just way too crowded in the short-term. For months, strategists and portfolio managers have been talking up the long Japanese equity on the back of a lower Yen trade. When that much money gets piled up on one side of the table, the tendency is for the market to shake out the weak hands – sometimes painfully.
There IS some speculation that the Bank of Japan may not be in agreement with the dovish Abenomics policies that have been the source for so much of the strategists’ play-calling. Only proof from the BOJ itself – in their words and actions – will tell us whether that speculation is true.
USD/JPY technical outlook
While theorizing on the “why’s”, technicians are simply concerned with the price movements. Those technicians had been calling for a continued move down in the USD/JPY to the 95.88 – 96.57 target range. Even they probably did not anticipate that rang being hit this rapidly. First support now comes in at the lower edge of the projected support range at 95.88. Resistance for USD/JPY comes in at the first two meaningful pivot highs from this recent decline at 96.75 and 97.50