The rally in the USDJPY, which arose after the appearance of confirmed reports of meetings of the former head of the Federal Reserve Ben Bernanke with the leadership of the Japanese government and the Bank of Japan seems to have reached the highest point.
Rumors rumors, but that to be followed by real action, many, both politicians and analysts, there are very serious doubts.
On Thursday, the USDJPY has drawn absorption candle - known Is Working Capital Model.
The market speculated on the intention of the Bank of Japan to launch a new round of quantitative easing, which will include direct financing by the central bank of households and the government. Such action with a light hand of Ben Bernanke are called "helicopter money".
In the short term USDJPY may still grow, depending on what the Bank of Japan will be decided at a meeting on 28-29 July.
But it will be difficult to grow. As the Tankan report, major Japanese companies have reduced their forecasts for USDJPY for 2017 fiscal year to 111. The Japanese press reported that major Japanese exporters have for 2017 fiscal year forecasts for USDJPY in the range of 105-110. This means that in the area of USDJPY = 107 or above, Japanese exporters will hedge their transaction buying the Japanese yen.
From a technical point of view, it is clear that the USDJPY moved to a long-term "bearish" trend.
In general, I see now a good opportunity to open long positions in the Japanese yen against a wide range of currencies.
The most promising is the opening of short positions against the USD and the EUR, as the majority of the capital invested in Japan, the US and Europe, and the repatriation of the currency in the case of favorable JPY events here will be the most powerful.
Any action by the Bank of Japan, except for the real panic will give only temporary relief pair USDJPY.
USDJPY may rise in the area of 110-112, but no more.
At the same time, extreme measures are unlikely because of the fear to cause a complete loss of confidence to the Japanese yen and hyperinflation.
The main two forces that led to the weakening of the Japanese yen - is the Bank of Japan's monetary policy and risk appetite - very weak.
I'll start with the risk appetite
US stock indexes updated maximum value and full of euphoria on the market is easy to fall down into a correction.
Brexit, the growth of bank and other problems in the euro zone, the danger of a new "China syndrome", in the US elections, the deterioration of the situation in the enterprise, reducing profits and decrease baybekov - all these dangers lurk located on the historical height of the US stock market in the late summer and early fall .
Investors have become more cautious in less than a month, and it is a true prerequisite for the inevitable correction, and not the fact that the correction does not provoke something much greater.
Large amounts of capital invested by Japanese investors in different parts of the financial world, guarantee the repatriation of capital in the case of global risk sell-off. The Japanese yen was the main protective haven currencies amid the financial markets.
With regard to monetary policy
According to various reports, in Japan there is an active debate on the need for new measures.
It is very revealing in this respect is the interview given to the agency Bloomberg, former director of the Bank of Japan Kazuo Momma.
Here are some of the statements:
"Of course, they can not earn eternity for 80 trillion of bonds" - Momma said. "They are aware of the fact that the approach to the limit, now or later."
"Even with this knowledge, it is not at all impossible that they will increase the volume of purchases from 80 trillion to 100 trillion yen, or 120, but it is incredibly difficult ..."
"Based on common sense, you should not think that they can begin to consider the reduction of the rate of purchase of securities in the near future."
With regard to inflation
Momma said that the Bank of Japan will be very difficult to achieve the inflation target over the next 12 or 18 months.
Moreover, Momma, who works at the Bank of Japan for about 35 years, sees no need to BOJ insisted on achieving their goals for consumer price inflation of 2%, because zero inflation is not a "living hell", and 2% inflation - "paradise".
A few quotes:
"I do not need to, they took various risky steps to achieve this goal."
"The Bank of Japan is faced with challenges everywhere, after oil prices fell in 2014, there was a strengthening of global economic uncertainty and the yen moved in the upward trend."
"It will be extremely difficult to confront all these challenges alone only monetary policy instruments and inflation to reach 2% in the near future."
It's time to sell USDJPY and EUROJPY. I expect the USDJPY decline in the third quarter, below 100. It is possible that we will see levels of 95-97.
PS When the article was prepared for publication, it became known that the head of the Bank of Japan Kuroda said that "there is no need and no possibility of helicopter money".
Author: Nicholas Ludanov Source