It is well known the vulnerability of Japanese corporates in this environment, they are particularly exposed because of the demographics and sector exposures. Restaurants, bars, entertainment etc all are looking very feeble, and with credibility seems to be fading on the monetary and fiscal side too since the latest rounds of stimulus there is room for a massive leg lower in JPY. For those following the conversations on Japanese fiscal bazooka, the sizes are insane... Abe just put through another 6% of GDP and raised the overdraft to +/- 15% of GDP. A comatose recovery is underway, even if the fiscal execution is flawless this will take years to recovery.
📍 On the USD side...
Hedging will become a lot lot cheaper with Fed zero rates meaning that the demand for USD will increase as it remains a more attractive hedging instrument than JPY. So we have the following picture: the king stuck in retreat via Covid forcing the front end of the yield curve to stay anchored to rates, while the belly and long end are starting to dislocate and tick higher. . Local politics will provide some ebb and flow although Trump looks a done deal. The only caveat is if Hillary throws her hat in the ring, low odds as per today but of course this will be one to keep an eye on and Biden dependent.
📍For the technical flows...
We are tracking an ABC sequence with the 'C' leg in play after this weekly close. with a time horizon of Q4 21 / Q1 22. The monthly chart is a little out of scope for retail trading, instead it will serve as a compass to help our Weekly, Daily and H4 maps.
A round of Macro Maps will be uploaded over the weekend. As usual jump in with charts, views, questions or etc and thanks for keeping the support rolling with likes, comments and etc!
Kommentera
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The attentive readers will have been asking how can USD devalue if USDJPY is marching towards the 150 outpost; but this is a race to the bottom! This is a good ploy in such a restricted monetary environment.
but will love to see what the pill back will look like.. if its a 3 wave correction .. then i will buy.
gwinfx
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WE MANY HAVE EURAUD MAKING A MASSIVE FLAT... WITH THE PREVIOUS HIGH BEING B..
gwinfx
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USDJPY HAS A STING AT THE END OF THE TAIL.. AND SO DOES EURUSD...
UnknownUnicorn3382580
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Wave E of the triangle can not break the extreme of wave C.... guess, some lower levels are possible to complete the pullback. Anyway, highly appreciated! Have a nice weekend!
ridethepig
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Excellent question @WXYXXZ, there is no break in this case as it only extended the lows without breaching on a closing basis. This is a particularly complex case:
ridethepig
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Summerset
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@ridethepig, If yr assessment is based on fundamentals, a geopolitical one is missing:-
You should consider the impact of a post corona global economy. Post corona there are increasing bets that the economies of eastern & western hemispheres will dis-associate to say the least "i.e their supply cycles will cease to become inter-dependent", this means that the USD will become less of a global reserve currency, and therefore much less in demand & value stressed due to continued internal stimulus programs by the FED. If & this "if" can easily become an "As" the Asian economies recover faster than the western ones, global trade & supply chains will shift from West to East, and the JPY will readily become the next global currency of reserve, followed by the Yuan in a decade or more - if China gains international trust & cultural recognition. Hence the JPY will appreciate against the USD.
Also, a Biden presidency CAN NOT be good for the USD. Biden will start his presidency probably with massive stimulus to undo Corona impact, & later undo Trump's policies. The treasury will issue more debt further aggravating the "total accumulated debt issue & its servicing". Problems that a world reserve currency, can NO longer bear on its shoulders, as the post Corona world becomes no more tempted / nor interested to invest in US debt. - remember, Trump said "we don't need the world...", well this premise is about to get tested.
What all translates to :-
1- remember the Trump victory back Nov'16, early 2017, the USD took off from 100 --> 117.50, and has been in decline since. Unfortunately, Trump's policies have had their chance & failed, had they succeeded the USD would be trading > 125. The coming election - If Biden wins, (which looks set some what), "WXYXXZ" is right, the above a-b-c-d-e triangle will turn into a grand A-B-C flat, and Wave -C which will commence on election night on Biden's victory. Speculation will rise on increased taxes, and strong regulations imposed on wall street "products". Wave-C in USD JPY will challenge 95-92.5.
2- One decade ago (2011-2012) the USD was bottoming against the JPY between 77 & 84. Back then it was recovering from the credit markets bust. At the height of the credit market balloon (2007), the USD/JPY rate made 123. Trump's aggressive policies made us challenge a lower high at 117.5. Now under a more difficult fundamental driver (Corona vis-a-vis the credit crash), its only logical to see the same lows again (77-84).
3- IMO opinion, the only narrative that can possibly avert decline in the USDJPY, will be Trump winning the election, and engineering a war between China & some US proxy, or even directly with China, either could, and that's "one big could" change the global perspective on stability, and bring down the house of cards in the East. - Again if that's what it is. - remember that the Yuan enjoys a Gold reserve.