Yen Weakens Substantially, Equities Hold Gains-For Now OCT 24, 2014
JPY Blows ADR to Highs on All Yen Crosses
There wasn’t much news released that was the driver of the Yen crosses yesterday, however there was an article detailing how the Yen is at its weakest levels (adjusted for inflation)since 1982 and that along with the consistent trade deficit for the last two years has the makings for a weaker Yen in the near future. As Kyle Bass has been warning for years (timing a little off) it seems as though its finally coming about. Unless the BOJ does a full 180 degree turn of monetary policy, to quote the article,
“the JPY becomes self-fulfillingly destroyed by the vicious cycle of trade deficit-facing importers who need to pay in foreign exchange for goods received…et voila, hyperinflation (or the BoJ entirely reverses track and blows up the world’s carry traders) and Japan becomes Venezuela…”
It will be interesting to see how this one will play out.
The lack luster move on the EUR/USD yesterday does lower the probability for the third push but its still valid until we see what they do today. If they hold this range then I consider it as they have ran the plan to its price point and will wait for some thing showing me a clear direction they intend to push. The bottoming at the lows does make me a bit more open for the long but I will need to see they wont let it pass 1.2613 after holding the range through the early London session waiting for the potential entry during NY later. Otherwise during London I will mainly be waiting for a test of 1.2671 or just above with a clear stop run or trapping pattern for the short.
GBP/USD May be Finished as well
I never like it when there are parts missing from the typical way they run pushes but I have to consider with the three moves over three days along with the 190 pip run from the highs that they just might be finished pushing the GBP/USD for now. Its also Friday when we have to consider the end of week flows as they close positions. Therefore I will be more open on direction on this pair as well. The safest levels are the lows at 1.6005 for the long while keeping cautious of a test to yesterdays lows. The best place for the short is yesterdays highs but the Asian highs right now are valid at 1.6038. In order it take the short there I will need to see the Asian range push lower and leave the box closer to the lows before running the stops of the Asian session and getting the breakout guys going in the wrong direction.
EUR/JPY Hits Stops Before 180 Pip Run
With all things considered I do think the higher probability is for a continuation of this move to the upside on the EUR/JPY but thats not quite enough to give me a bias after such a move. It has three intraday pushes up and only reversed 43 pips so far so there is not enough to convince me price action wise. I will be open for the stop run to the Asian lows for a long during London but it will need to be clear they wont let it drop and test the hourly 200 at the next level. Otherwise I am open for the short from the highs today however if the hyper inflationary situation keeps up this thing will break the highs today or next week.
Forex News Today
The calendar does have a few events of note today starting with German GfK Consumer Climate. With the better than expected Manufacturing PMI yesterday this does have potential to surprise to the upside as well since expectations are for a drop. If its still below the last print but better than expectations we probably wont see much but an pop above should create some Euro strength.
The UK has their GDP released today expecting a drop as well. My thoughts are this will be close and we wont get much push on the GBP pairs but if by chance it does miss we could get a sustained move depending on how big it is.
The US has New Home Sales expected to drop significantly. With the bar set that low I see a better chance for a miss to the upside but it will need to be large to create much USD strength. Otherwise a smaller miss to the downside has a better chance of creating weakness as QE thoughts come back.
Have a great weekend
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