U/J continues to approach the historical low at around 79.80. Perhaps a lot of buy orders are sitting there for a Double-bottom trade. But looking at the U/J daily chart, before each reversal move, it tumbled hard for a couple of days. If this pattern repeats, U/J might break significantly below 79.80 before bouncing back up. Let's see how it pans out in the following days.
I wondered the Open Position report charts are based on number of traders or based on the total dollar amount on long/short positions.
Let's see what the COT shows later today. Price is being pushed towards ATH (Yen) gunning for stops, either hands off or increase stop size.
Slight reduction of non-commercial Longs & increase in Shorts. ATH is very close now, pretty bearish Monthly close. <img src=http://snalaska.net/cot/current/charts/JY.png>
I sense Geithner 'showed his hand' during last meeting with finance ministers, Japanese have calmed down a lot since that meeting, the sudden drop of promises to intervene suggests that Geithner possibly let them in on what the FED is about to announce next week regarding QE2, that may reflect in USD being bought & YEN sold. That is just a hunch. On the other hand he could have told them that whatever they were planning on doing would be pointless as QE2 is going to be bigger than anticipated resulting in USD sell off. According to current COT Large Specs increased their Long positions in the USD Index, but nothing dramatic.
USD Index. Large specs flipped to being net Long Dollar, open interest also picking up. <IMG SRC=http://www.elitetrader.com/vb/attachment.php?s=&postid=2996619>
The Japan Investor: As we mentioned last week, the QE2 event has now been so hyped that it has probably become a "sell on the news" event, which causes a short-term rally in USD, a back-up in US treasury yields, and profit-taking in stocks (around 10%) as well as commodities and even gold. However, as the Fed is expected to remain committed to going where monetary policy has never gone before until US employment recovers, QE2 will eventually push USD and treasury yields even lower, and push investors even further into risk trades. After much wailing and gnashing of teeth, Japanese companies are beginning to believe that nothing can be done to keep the yen from surging past the 1995 against USD, to JPY70/USD or beyond. The more enlightened of them, such as Toshiba, were already implementing plans to restructure their operations to be able to neutralize the strong yen's impact. Toshiba for example intends to restructure their business to withstand JPY70/USD exchange rates._ Over the short-term, this is bad news for companies down the food chain that supply these major corporations, as the majors will be moving even more production overseas as well as shifting procurement to overseas suppliers. To survive, companies down the food chain will either have to supplement this lost business with new, foreign customers, and/or also move their operations offshore. As far as stock prices of the major Japanese automobile and electronic manufacturers are concerned, the damage has already been done, as stock prices have been falling even faster than earnings and returns on capital employed for the past decade as growth expectations are completely wrung out of stock prices. In this regard, these stocks are now cyclical, marginal trading plays rather than core long-term holdings in foreign investor portfolios. There are no Apples or Googles here. If you want to leverage the yen's strength, buy a JGB instead of a Japanese company in the electronics or automobile sectors as long as, a) the Fed is committed to QE2, and/or until these companies learn to embrace JPY70/USD or higher.
Government vs Speculators or how Unlimited beats Limited resources. (In Russian). <object width="640" height="385"><param name="movie" value="http://www.youtube.com/v/zbZkfYY-LsM?fs=1&hl=en_GB"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/zbZkfYY-LsM?fs=1&hl=en_GB" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="640" height="385"></embed></object>
Interesting situation arising where the government won't let JPY advance above an all time high & traders are unwilling to reverse long positions. Let's see what the COT looks like on Friday. Normally though if a level fails to be breached then an opposite one is tested for obvious reasons. So are we looking at a sort of unofficial fixed rate in UJ or upper resistance test?