- USD has dropped over the weekend from Donald Trump’s executive order over Muslim Ban and it has caused panic over the market for a risk off sentiment day. The USD/JPY has dropped total of 212 pips from Friday’s high to today’s low after the BOJ comment. Monday all the USD fundamental datas have been very promising, while BOJ has kept everything unchanged with more dovish outlook for YEN and had extended the bond buying program for 1 year. Fundamentally speaking, USD is still way much stronger than JPY and we think the fundamentals will eventually support USD/JPY to keep going up. We think the previous movement had been largely a sentimental drives and should die down soon accordingly to how the major indicators of global market reacts; we had lower equity markets but not collapsing, we had strong yield in US and the gold price only went up $2. All these have signalled investors’ continuation of confident in USD. We think to get in at current level will be an attractive area with SL below 2 swing low of 112.40.
- The catalyst was the panic movement created by Donald Trump following by dovish report of BOJ, we know have a fundamental divergence in these 2 currencies with technical range outside normal daily range to give us a good indicator that buying now at 113.50 might be a good level to ride it up later.
- We’re oversold by the daily range from Sunday opens tip now.
- The risk is the sentimental drivers which might be larger than we expected, if that’s the case we will be whipsawed out and that’s why we used 150 pips as our SL which is even lower than our Daily Trade’s SL @ 112.26.
- The future projection from current belief is a bit clueless, fundamentally traders are bias toward buying USD but no one wants to get in at the firing range now. We’re getting in this trade because the fundamental strength has supported our scenario especially after the BOJ statement, now we just wait to see the sentiment to die down and let the fundamental regains its dominance.
- Yes i got in because although there is risk but the upsides high and i had proper protection of SL. What’s left is the unknown which i cannot control anyway.
LONG USD/JPY
@ 113.52
SL @ 112.04
updated Jan 31st 7am
-the market has turned on to the risk off sentiment will a shift in the European equities, but the sentiment provided to be unstable as we’re having a mix market now.
USD/JPY continue to be in the range with the high of the day to 113.97 and low at 113.25, only 69 pips far below the average daily range of 135 pips.
We’re still holding this trade because now the risk of BOJ has passed and USD/JPY had regained strength ahead of the positive sentiment of the equity markets, however, we just had another comment from Donald Trump which pressured USD/JPY once again and now the 1H and 4H candlesticks all look pretty bearish to the downside.
We’ll have to see how the market pans out but generally speaking we’re in this range bound area and should continue to be unless we have new catalyst coming out later on in NY session.
updated Jan 31
Unfortunately the market took a large downside movement from a new comment from Donald Trump this morning, and the pair tanked to as low as 112.07 - which is only 3 pips away from our SL.
We barely survived and was surprised to see such volatile movement from his comment as a catalyst, nevertheless, it was unpredictable and every trade has to be prepared to have an outcome of loss.
We’re still holding this trade as it has recovered form the low to 113 now.
There are still many resistance upward in 113.50 and 114.
We’ll have to see how the Asian equity markets and European markets work and follow closely to any new comment by Donald Trump.
Because of the FOMC tomorrow, we really don’t want to hold any USD trade prior to that event and will most likely to get out at BE at 113.50 or 114 at best.
updated Feb 1st
The Asian equity markets were in green during the Asian session and we saw all JPY pairs have been recovered largely because the sentiment has shifted on.
USD/JPY has climbed up from the low of 112.07 to 113.60 now.
We’re still in the drawdown and am at a tough spot to decide our direction for this trade.
Fundamentally, the FED is going to have meeting today and this will once again remind people of their agenda for hiking as economically streaking, dollar is heated up so no matter how displeased the White House might be, as for now FED is still independent in making their own decision about USD.
This fact might shifts the underlying sentiment from yesterday’s negative sentiment for USD and traders might begin to price in now for a hawkish FED later in NY session afternoon.
Sentimentally, after a 2 days of panic sell, the market might come for a retracement for today as it had already happened in Asian equities now.
It might be profit taking or sentiment shifts, regardless, this might pressure JPY to further support USD.
So we do have fundamental and sentimental reason to keep staying in this trade for now, and see if it can break above 114 or break down 113 again, which ever direction will be the direction for the day of USD/JPY. for now.
My plan is to keep holding it at least until the next few hours and see how 114 & 113 is holding.
UPDATES FEB 1ST 820AM
-The equity markets have been green from Asian session until now, the JPY is the weakest currency throughout the day and we just had the U.S ADP Nonfarm employment change which came out as a positive deviation. This of course will further support USD versus JPY as we’ve already climbed up from yesterday’s low.
We’re now testing the upper movement of 113.65 area and really want to see the pair break above to 114.
The market belief might be keep buying USD as the fundamental data just proved the the solid economic strength of USD.
Of course, we might still have Trump comments anytime today to chance the sentiment completely.
So still trade with cautious.
updates Feb 2nd 12:10am
-we’re still in this trade and it will most likely to go sideway from now on.
I’m still in because the fundamental datas today had been very strong to continue supporting USD, however, the sentiment just seems to take a larger impact and I would not recommend anyone to get into USD trade now.
I will wait to see how the NFP act for Friday (if i’m still in this trade) but will most likely to get out before weekend.
updated on Friday Feb 3rd
-we barely survived in this trade and had already considered a loser anyway, however, since we’re still in, this is what i think will happen.
The market after 2 consecutive positive job datas from US will start buying into the NFP from London session all the way until NFP release, after the release, the USD might spike a bit if the result is a positive deviation, however, it will soon die down and USD will be pressured once again.
I also don’t think traders will hold USD over the weekend as the uncertainty from Donald is high.
If the NFP is a negative deviation or result, we will also see faster drop in USD.
So i’m going to monitor now and use NFP or any buy rumour sell fact momentum to actually get out this trade.
If i’m not able to do that, I will exit the trade with a loss prior to the weekend because further gap down risk is at large.
updated on Friday Feb 3rd
-we barely survived in this trade and had already considered a loser anyway, however, since we’re still in, this is what i think will happen.
The market after 2 consecutive positive job datas from US will start buying into the NFP from London session all the way until NFP release, after the release, the USD might spike a bit if the result is a positive deviation, however, it will soon die down and USD will be pressured once again.
I also don’t think traders will hold USD over the weekend as the uncertainty from Donald is high.
If the NFP is a negative deviation or result, we will also see faster drop in USD.
So i’m going to monitor now and use NFP or any buy rumour sell fact momentum to actually get out this trade.
If i’m not able to do that, I will exit the trade with a loss prior to the weekend because further gap down risk is at large.
UPDATED AFTER NFP
-The NFP was as expected produced a great employment datas for USD with positive deviations on both Non-farm payrolls and private payrolls.
Howver, the average earnings m/m was a miss with only 0.1%.
As mentioned, we need a higher wage to growth in order to inflation to pick up and FED to hike rate.
The job numbers had already been anticipated to increase from the census and from Wednesday’s ADP, so although this was a positive deviation for the numbers, it was mostly anticipated.
So the surprise became the low wage which was really a worry sign, and this alone plus the already negative sentiment of USD made me to exit right away.