Short EUR/JPY (From 15-Apr to 22-Apr)
Real-Time AmpGFX – Bought EUR/JPY to close short (Sun 4/22/2018 1:29 PM)
Bought half unit EUR/JPY at 132.34 at Asian open
Comment
Trade rhetoric appears to be cooling with Mnuchin overtures and positive Chinese response over the weekend.
The rise in US yields appears pervasive and driving other markets, including a stronger USD in the last week.
We see scope for recovery in EUR/JPY on higher US yields and some recovery in risk appetite and higher equity markets to start the week on improved trade rhetoric.
Real-Time AmpGFX – Comment on EUR/JPY short position and orders (Mon 4/16/2018 12:02 AM)
Comment
Political risk remains high in the US and may continue to build, preventing a sustained rise in the USD, and threatening broader risk appetite.
In the last week, House Speaker Ryan announced he would not run in the November election, leaving a sense that he thinks that Democrats may take the Senate, and/or he does not want to be around for a potential storm coming over the Mueller investigation, and be called on to defend Trump.
The raid on Trump’s lawyer Cohen’s offices is reported to be a broadening of the investigation that may take many turns and threaten to pressure the legitimacy of Trump’s presidency, and cause Trump to lash out by testing his powers as President. All of this threatens stability of government in the USA as the mid-terms loom large.
James Comey’s book is released and he is interviewed this week
More recent news polls show Trump’s approval rating rising, which may reflect his tough rhetoric and tariff threats against China. If Trump feels the heat from the Mueller investigation, he may step up trade rhetoric.
At the same time, Predictit.org suggests the probability of Democrats taking the House have increased to above 70%, perhaps reflecting signs of a highly energized anti-Trump vote.
The WSJ reported on Thursday that the Trump administration is expected to announce the $100bn in Chinese goods it plans to impose a 25% tariff on “as soon as next week” up from an initial list of $50 bn in Chinese goods. And the US Treasury is “crafting sharp prohibitions on Chinese investment in advanced U.S. technology”.
Risks over trade policy appear to be undermining the KRW and TWD somewhat recently, and some other emerging market currencies have turned weaker (RUB. TRL, BRL, INR), generating broader uncertainty for emerging markets. This trend may be propelled by some lost moment in global growth indicators recently.
The JPY has underperformed gold and EUR significantly in recent weeks, and USD/JPY and EUR/JPY are near key resistance levels. The weakness in JPY as risk aversion appears to be building seems out of character. It may be nearer the point where it begins to reverse some of this underperformance.
The latest polls also show pressure is building on Japan Prime minister Abe. This may be regarded as a risk to the persistence of QE policy in Japan, and in general, add to risk aversion than may tend to strengthen the JPY.
EUR appears to be defying to odds recently with widespread evidence that the Eurozone economic momentum may be waning and inflation expectations are falling, potentially symptoms of a stronger EUR. ECB speakers this week may sound dovish.
EUR may have some safe haven attributes itself, making it hard to sell against an EM or commodity currency. It is also hard to sell against the USD given the political risk in the US.
As such we have sold it against the JPY.
Position
Short half unit EUR/JPY at 132.22; s/l 133.23; t/p 127.88
Real-Time AmpGFX – Sold EUR/JPY (Sun 4/15/2018 10:31 PM MT)
Sold half unit of EUR/JPY at 132.22
Comment to follow