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Forex Profit Alert Daily Briefing
*** WATCHING: EVERYTHING! GBP/JPY (and other yen crosses), EUR/USD (and other dollar crosses), GOLD... and more. These markets are getting interesting!
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Dear Forex Profit Alert Subscriber
The US dollar (USD) continued to strengthen yesterday without any real pullback to allow us into a short-term long dollar trade. Both the euro (EUR) and sterling (GBP) were once again lower versus the US unit in very early European trading this morning.
The exception this morning is the Japanese yen (JPY) which has strengthened sharply across the board. The unwinding of ‘carry trades’ that I mentioned yesterday has continued with a vengeance overnight as GBP/JPY and NZD/JPY in particular have been sold aggressively.
Sterling is now some 600 pips lower and the New Zealand dollar (NZD) 300 pips lower against JPY from highs seen earlier this week.
This massive profit taking has been long overdue as I reported yesterday. It has been sparked by talk of an increase in Japanese rates in the next couple of weeks and also a large amount of Uridashi bonds maturing over the coming days.
Uridashi Bonds are basically non-Japanese Triple A Bonds issued offshore from Japan - normally in New Zealand, Australia or sterling, for example. They are sold to Japanese retail investors looking for higher yielding alternatives to JPY investments.
I don’t think that this move is the start of a new JPY uptrend and we will be looking to enter either a GBP/JPY or NZD/JPY trade when we get the right level. The good news is that the levels I am looking at just got a whole lot closer...
These moves overnight are in part due to lower oil and commodity prices also weighing on the likes of the NZD and Australian dollar (AUD).
The Japanese stock market (Nikkei) has also fallen sharply, dragged down by ‘yen sensitive’ stocks which have been smashed as the Japanese currency strengthened.
Data Today
** Nothing from the UK today.** Euro Zone Consumer, Industrial, services, Business and Economic Confidence Indicators for November at 9.0am. November PPI and Retail Sales also due at 10.00am. Eurozone Unemployment for November at 10.00am.
** US Unemployment and Non Farm payrolls for December at 1.30pm.
** Canadian Unemployment for December at 12.00pm, IVEY Purchasing managers Index for December at 3pm.
Today looks like being a busy and unpredictable day as volatility has risen due to the large moves seen in Asia overnight.
As far as USD is concerned, much will depend on the release of the US unemployment numbers today. If the dollar continues to strengthen then I will be looking to use this USD strength to enter a long EUR/USD position. But for now, the JPY holds centre stage as investors are forced out of long-term ‘carry trades’.
Judging by the speed and ferocity of this move there may be more to come today as clearly many traders are caught offside and more stop loss buying of JPY looks likely before the market recovers.
Speak soon,
Tom TragettForex Profit Alert
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