Sept 18th – Trade of week – Lets get long USDYEN: By Greg Matwejev

Last week USDYEN had a great week. Post the false break of the 108 cliff  USDYEN has motored north to close last week on the extreme highs. Those extreme highs also co-incide with the range highs of the past month and a neckline of a triple bottom. That neckline also converges with the 100 DMA at 111.10.  Clearing and closing above here  will be very tech bullish. The triple bottom is approx 3 big figs wide so targets  towards the top of the big triangle formation price is trading in at 114+.

There are quite a few fundamental reasons to like USDYEN in the short term and longer term now. The Equity bull market is risk positive and provides a bid for USDYEN. S+P record highs 2500+ and NK now back above 20K. The hawkish shift by central banks… BOC/BOE/ECB has underpinned big long X/YEN flows. Check GBP/YEN last week if you have any doubts about this. Its the Fed’s turn this week with the FOMC Wed. Balance sheet reduction should be announced and also update on dot plot’s. Expect the Fed to leave the dot plot’s of rate hikes in place. Its way to early to communicate a slowing down or not leaving the option open to continue the gradual normalization of rates. The market is priced way too dovish on the Fed … less than 50% for a Dec rate hike and the FOMC should be a wake up call. Yields should be supported and flow into USD support. US10yr yields are close to a big bullish technical break. No currency pair likes yields going north than USDYEN.  Tax policy noise is getting much stronger and could be a huge game changer and bring the reflation trade back. Finally crude looks tech bullish again. It looks like it will want 50 bux and much higher levels again in short term.  This will help yields and USDYEN. Forget North Korean risks. North Korean tensions have been a buy the dip trade EVERY time. The market wont sell off anymore unless there is US military action. That looks very unlikely.

Stay long into FOMC and work stops sub 109.40.

By | September 18, 2017

Source: FXCharts

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