USD/JPY Crowded Trade

 Back at my screens on Monday and ready to crush things this week.

And what a week it is too, with plenty of tier 1 economic data to affect the majors. This is of course capped off by the highlight of the week, the April FOMC decision… into the RBNZ just 3 hours later… AND the BoJ just 8 after that!

Speaking of Japan, this Tweet from @ReutersJamie caught my eye this morning:

yen-net-long
When a publicly obvious trade gets overdone, there will inevitably be a correction. The short USD/JPY (or long JPY) trade is definitely one of these openly public trades that every man and his dog knows about, talks about, reads about etc etc. If you haven’t, then I’m sorry but you’ve been living under a rock. Go outside, the sun is shining!

What you as traders have to ask is, ‘how long is too long?’ With both FOMC and the BoJ coming up at the end of the week, if a portion of the crowd starts to close their short USD/JPY positions then the long side could start to gain some traction – and quick! Add in some BoJ rhetoric that grabs and we could see some instant re-pricing.

USD/JPY Daily:
160426_usdjpy_daily
Click on chart to see a larger view.

But what makes this time any different from the last few months that the market has ignored whatever the BoJ chooses to spurt from their lips? The other side of the coin, probably the common sense side if you’re one to continue following the trend, is that this rally is an opportunity to sell into.

Looking at the above daily chart, we’re going to come into resistance at 112.38 to the 114 area and the play could easily be a fake-out higher into Thursday and then a huge slap back down again to new lows.

How are you looking to trade USD/JPY?

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Chart of the Day:
Commodities trading in China has hit the headlines again, with Morgan Stanley citing a jump in local speculation across the commodities spectrum… What could possibly go wrong?!

Anyway, I don’t want to buy into this one too much just yet, but the following Gold chart did catch my eye.

GOLD Weekly:
160426_gold_weekly

Yes that is another weekly chart and before you throw your mouse through the screen in impatient frustration at the long term chart, just bear with me. Look at this level!

The 2009 spike up is just about the cleanest level on that chart. Now 7 years later, we are back above the level again and look at where last week’s weekly low just happened to land.

GOLD Daily:
160426_gold_daily

I also just wanted to show the short term bearish channel resistance that has come under real pressure after the latest huge momentum move up to begin the year.

Is Gold brewing for a pop higher?

Source: Vantage FX

 

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Charles Clifton
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