USDJPY has been on a tear in recent weeks. Since China unleashed QE-lite, JPY and CNY have greatly diverged with USDJPY breaking above 109 and pushing six-year highs. This recent ‘relative strength’ is the most extreme overbought for the currency pair since early 2001 – which saw USDJPY plunge 30% in the following six months. The tick-for-tick rise in Japan’s stock market also broke a 9-month almost-perfect analog with the last time the nation raised its consumption tax.
Perhaps even more worrying in the world of FX trading, ECB Governing Council member Ignazio Visco told the G-20 that it may not need to add stimulus measures after steps in the past three months pushed down the euro noting that “there may not be a next step,” since he explains, the ECB was “bold enough to reduce interest rates to a level that was unexpected to the market.”
The extent of the exchange rate’s fall is “more or less, given the moves that were done between June and September, the right response,” said Visco, who also heads Italy’s central bank, but added very Japan-like, “the ECB isn’t targeting any exchange-rate level.” That is not what the EUR shorts will want to hear.
USDJPY is at six-year highs with RSI at its most extreme overbought since 2001 – which saw a 30% decline in the next 6 months.
This post was published at Zero Hedge on 09/21/2014.
Follow on Twitter
Recent Comments