A very quick and brief couple of fx tech updates from the guys at Nomura.
Both trades are very important to asset markets for obvious correlation reasons.
Here the eurusd, the major component of the DX (dollar basket).
And here usdjpy
I’m biased long US$ vs the euro for now but its a fairly neutral position holding long US$ equities with fully funded cash rather than using the US$ as a carry currency.
I am more aggressively long US$ vs the JPY. On a macro level i believe we have seen the end of the secular bull trend of the JPY and we now have the start of a new secular debasement of the JPY. For now the ‘best’ currency to attack the jpy with is the US$. I certainly don’t expect that to last so i am on the perpetual look out for a better more sustainable currency to hold as the dollar has plenty of issues. For now im sticking with the recent entry from 97 or so long US$ short JPY. The carry trade is in full motion long Nik225 equity with borrowed JPY, breakout running!
As an update and background to this usdjpy trade. Its been a focus over the last few years for me driven by the secular shift in monetary policy at the Bank of Japan. Its a trade i’ve been involved in several times now originally taking the 76 level vs the US$ long until the 94 level. I feel fortunate to have reentered the new secular trend at the 97 level but time will tell of course. To lose on a good trading entry is no bad thing in my book.
Here one of my medium term charts on the USDJPY. The Nik225 remains very supportive of the recent entry as said above.
I should add here that near term the jpy is over bought and the risk reward not providing an entry point today. If you don’t have an allocation I would personally be patient now.
All the best
Rich