CURRENCY WARS - First, a major Yen decline

[drbubb]

... speaking of Yen:

 

 

and another look at the longer term fractal

 

 

Very nice Yen charts, which I will cc to the Main FX thread

 

What next?

Just 1-2-3, or something more than that?

[drbubb]

From Happy Charts...

 

 

... speaking of Yen:

 

 

and another look at the longer term fractal

 

 

Very nice Yen charts, which I will cc to the Main FX thread

 

What next?

Just 1-2-3, or something more than that?

[drbubb]

Welcome to the Currency War, Part 7: The Zero Sum Game

 

Based on the past few weeks’ stock market action, Japan’s decision to flood the world with yen looks like a raging success. It’s not of course. Here’s a cogent take on the subject from ex-hedge fund manager Bruce Krasting:

Japan’s Gains Are Losses For Everyone Else

My daughter called last night, she’s made her reservations for a honeymoon in Japan. Six months ago she was leaning on going to Thailand, but the cost of a trip to Japan has fallen so sharply, that she was able to afford the cost of a visit to beautiful Tokyo. She’s delighted.

The dollar cost of a hotel in Tokyo has fallen by a very significant 25% in just a half-year. I’m sure that many other tourists around the world will now consider Japan as a destination for a vacation.

The devaluation of the Yen is working!

While I’m happy for my daughter (and those hoteliers in Tokyo) I’m frustrated by the enthusiasm that financial markets have demonstrated by the major devaluation of the Yen. To me, this is a zero sum game.

The gains in Japan, are just losses everywhere else.

I see the big losers as Korea, China and the rest of SE Asia.

America is going to get hit fairly hard as both tourism and trade react to the cheaper currency. Europe is so screwed up today the consequences of the Yen devaluation will be masked, but the German car exporters will get beat to pieces as the exchange rate adjustment flows through on car prices. Places like Brazil will feel the consequences as well, liquidity out of Japan will leak into local capital markets, it will be the source of unwanted inflation.

A lot of my readers resent the fact that big money gets bigger because it is big. The Yen devaluation is a classic example. It’s my understanding that some folks have gotten spectacularly rich from the plunge in the Yen. (not just those who made it to the papers) The beauty of the Yen short trade is that there was very little risk. The government telegraphed its intentions perfectly. Damn near every speculator in the world was able to profit from what has happened. The gains are measured in the 100drs of billions of dollars.

===

/more:

http://dollarcollapse.com/inflation/welcome-to-the-currency-war-part-7-the-zero-sum-game/

[drbubb]

Important Top in the USD may already be in place ... update

 

 

It looks like a decline has started already.

 

(Here's Gary S on the USD):

 

April 13 weekend report

Posted on

April 13, 2013

by

Gary

Dollar:

The first story today is the dollar. It has been my theory now for several weeks that the dollar rally is a mirage. Usually a dollar rally signals a flight to safety during a period of risk off, corresponding to an intermediate degree correction in the stock market.

That was not the case this time. The dollar wasn’t rising because of a flight to safety. The dollar was rising because the yen, euro, pound, and Canadian dollar were all dropping down into intermediate or yearly cycle lows at the same time. This put tremendous upward pressure on the dollar for no other reason than traders were selling everything else.

That phase has ended.

At this time I’m confident that at least 3 out of the 4 currencies have completed their decline and begun intermediate degree rallies.

The only one still in question to complete the bottoming cluster is the Yen. I’m not sure it has made a final bottom just yet. Once it does, and starts to rally, the dollar is going to come under extreme pressure. All of these currencies produced extremely sharp ICL’s and regressions to the mean and are going to push very sharp upside moves as they come out of these lows. That is going to translated into a very hard move down in the dollar.

As a matter of fact, on Friday the dollar marginally pierced the previous daily cycle low. When this happens it indicates that the current daily cycle has “failed”. All that means is that a pattern of lower lows and lower highs has begun. This almost always signals that an intermediate decline has started.

 

 

FXY / Yen etf ... update

 

 

FXE / Euro etf ... update

 

[drbubb]

All Currencies - breaking out (while Gold falls?)

 

DBV /

PowerShares DB G10 Currency Harvest Fund

... update

 

 

I have just begun to track this etf - It should move inverse to gold, I would have thought

 

DBV - currencies versus DGZ - inverse Gold ... update

 

[happy]

And a brief update on the Aussie (in USD terms): approaching key resistance level

 

 

 

brief update on Aussie: intraday violation of descending trendline, price reversed at 50% fanline and closed below trendline. if the low near 102 goes, then this would suggest price heading to the 62.8% line (currently around 95, but rising)

 

 

 

. . . meanwhile the AUD/JPY cross has filled the first "gap" and is approaching some support near 98 and change. It will be interesting to see how price behaves here, another "gap" near 90 remains to be filled.

 

[happy]

from Slope of Hope:

 

Well, the only big short I had coming into today was FXE, and I got stopped out of it at a loss. I’m not touching it again, because the EUR/USD has pushed too much to the upside. More important, I am quite concerned that the inverted head and shoulders pattern – - very much intact – - could pose a meaningful risk to equity bears. This demands continued observation, as it could certainly influence equity strength in the weeks ahead.

 

 

 

 

For what its worth, Yves Lamoureux seems to have turned bullish on the Euro, while expecting a substantial correction in Gold, based on Hedge Funds unwinding their Long Gold Short Euro positions:

 

 

 

. . . actually, looks like he turned bullish on the Euro on April 4.

 

[Jake]

Still Deflation for the Japanese. (for now)

 

http://www.japantime...w/#.UXvhGMrk3is

 

Consumer prices fell 0.5 percent in March compared with the previous year, logging five consecutive months of decline and underscoring deflation’s persistent grip, the internal affairs ministry said Friday.

[drbubb]

from Slope of Hope:

 

For what its worth, Yves Lamoureux seems to have turned bullish on the Euro, while expecting a substantial correction in Gold, based on Hedge Funds unwinding their Long Gold Short Euro positions:

 

 

 

. . . actually, looks like he turned bullish on the Euro on April 4.

 

 

Be Careful (and watchful) with a Long position in the Euro... update

 

There's plenty of overhead resistance:

 

[drbubb]

For the RECORD here, the A$ looks set for a Big Drop now

 

EWMS - is talking about a Yen-like plunge in a Currency (but does not specify which one):

 

So the Yen slid further today, that's probably a bear-trap so please pay attention.

But the really big news in FX today came from elsewhere and this was clearly highlighted in the latest flash trend alert sent to your inbox earlier today.

 

Could in be the A$ ??

 

FXA ... update

 

 

FXA Weekly ... update

 

[drbubb]

NZ dollar slips after Wall Street Journal report

New Zealand Herald - 92 Minutes ago

The New Zealand dollar fell after a report that the US Federal Reserve is planning to slow its policy of quantitative easing, increasing the attractiveness of US dollar assets. The kiwi fell to 82.74

[happy]

 

from bond thread . . . 10 year yield in Japan: bloomberg

 

 

 

 

which one would expect to weigh heavily on the AUD/JPY carry trade, currently in the process of rolling over . . .

 

[drbubb]

Astro-Cycles

 

The Yen is the strongest currency since 1950 but should end its bull market in 2011-12

The US Dollar is the weakest currency since 1980 but should start a 4+ year Bull market in 2011-13

The CDN Dollar is probably ending its 6-9 year Bull market in 2011 but is in a larger Bull into 2020-40

 

===

/more: http://astrocycle.ne...Mar15eq.php&A=1

[happy]

Nice piece by John Mauldin: http://www.mauldinec...an-all-the-time

 

 

 

 

All Japan, All the Time

 

Japan grew at a 3.5% annual pace last quarter, the fastest pace in a very long time. Of course, government officials see this development as vindication of their new policies and will no doubt decide that even more of the same will be needed in the future.

 

Retail sales in Japan are soaring as a “wealth shock” electrifies the economy. The Nikkei index has risen 70% since November, with foreign hedge funds among the first to jump on the bandwagon. The chart below provides some perspective on that rise. I can see several similar moves in the past 20 years. If this were a one-year rather than a 30-year chart, would everyone be so eager? I'm not saying that the move isn’t real. A lot of money has been made, at least on paper.

 

The weaker yen is already delivering a powerful punch, accounting for almost half the growth in the recent quarter. The currency has dropped 30% against the dollar and against China’s yuan since August, and 37% against the euro.

 

. . .

 

Currency manipulation is against the G7 and World Trade club rules. Japan, they contend, is merely engaged in a domestic policy move to try to stop deflation and kick-start the economy. So anything that happens on the currency front is a complete coincidence.

 

Except that it isn’t.

 

Japan has been in a deflationary slump for over two decades. Nominal GDP has not grown. Government debt-to-GDP is now over 240%. Interest rates have been stuck at the zero bound. There has been no control of the fiscal deficit. The trade deficit has been rising. All this led me to start calling Japan "a bug in search of a windshield" a few years ago.

 

. . .

 

The team at Mauldin Economics, writing in Just One Trade this week, sent out this note:

 

Let's put the recent drop in the yen in context. The Nihon Keizai Shimbun, the main Japanese business newspaper, has reported that every one-yen fall in the yen/dollar rate will translate into a $2.7 BILLION increase in profits for the 30 largest Japanese exporters.

 

 

For every one yen the currency drops in value against the dollar, Toyota estimates that its profits will increase by $340 million. PER ONE-YEN DROP! Toyota reported $3.33 billion in profits last quarter, so that additional $340 million of profit per one-yen fall could send its second-half profits – and its stock – to the moon.

 

But those profits don’t just magically appear; they come from sales. Sales that are in large part due to better terms of trade and lower costs. Those profits are from sales that might have gone to other companies based in other countries and that might have been valued in euros, dollars, yuan, or won. Which is why businesses and finance ministers all over the world are not happy with Japan.

 

. . .

 

Profits in companies in Korea, Hong Kong, and Taiwan are getting hammered, as those companies have to lower prices to compete with resurgent Japanese firms. While the government of Japan will never publicly admit it, it will not be long until the yen is at 120 and then moving even higher, although the road to enyasu will get bumpier as the yen falls ever more and other countries respond. Japanese monetary policy is almost irrevocably committed to continuing to devalue the yen for a very long time at what will be an ever-increasing rate.

 

. . .

 

Let’s Export Our Deflation

 

The number one export that Japan is offering is its deflation. It is trying to push deflation on every country that competes with it for trade. That is rather the point of an inflation target of 2%. It is just as if the leaders of Japan had got together and said, “We can’t seem to get rid of our deflation. Let’s see if we can export it.”

 

. . .

 

The Hard Part: Structural Reform

 

But new growth will also require concerted political and structural reform, something that Japan has been reluctant to tackle in the past. They would not restructure their banks or their debt after the bubble burst in 1989, and their failure to do so has been a main cause of the economic malaise of the last 24 years. The history of Japan since 1989 has been that they avoid real reform, preferring the easier option of more government spending.

 

. . .

 

In short, the Japanese government has embarked upon an economic experiment in Keynesian theory that is breathtaking in its promised scope. They are betting that they can gear up enough growth to overcome deflation and demographics, allow the country to balance its budget, find an inflation level that will allow the Japanese debt to shrink relative to GDP, make Japan even more of an export powerhouse, and increase productivity on a scale never before seen in a developed country. It leaves one to wonder whether they might not solve global warming in their spare time.

 

They will do all this while hoping that the rest of the world sits idly by and watches Japan take export market share through quantitative easing. Meanwhile they're picking a fight with China over islands that are basically piles of rocks, a dispute which will cost them massive amounts in lost sales, far more than the worth of the islands, even if there is substantial oil in the surrounding waters. Japan is also betting that the technology landscape in its key industries won't change the too fast. How could anything go wrong here?

[happy]

Kyle Bass talk on Japan

 

http://www.youtube.com/watch?v=ZY6IEpKRA7Y

[Jake]

Thank for posting!

[happy]

Kyle Bass talk on Japan

 

http://www.youtube.com/watch?v=ZY6IEpKRA7Y

 

 

[Jake]

"the history of Japan since 1989 has been that they avoid real reform, preferring the easier option of more government spending."- Maudlin

 

Surely it's the same for the other Western governments, too (since Lehman).

 

[drbubb]

Kyle Bass talk on Japan

http://www.youtube.com/watch?v=ZY6IEpKRA7Y

Very pithy ! Thanks.

 

Kyle Bass : Japan will be first (to hit the wall)

NOTES

======

Japan : "Already in the Zone of Insolvency"

+ 25% of Tax revenues go to pay interest

+ Average rates paid now may be 50 bp, across maturities

+ At 200 bp, all the tax revenues go the debt repayments

+ Bass thinks Japan rates "will go into the teens"

+ Ponzi schemes fail when more people are retiring, than entering the system

Q&A :

+ Japan holds $990 Bn of Treasuries, and may "need the money"

+ Holding Japanese equities : "a pretty scary thing", but could rise another 20-30%

 

+ Has huge position on (JGB short?), bank wants to buy it back (400bp target)

+ Asked: What are you buying: Gold or Guns?

: "I am paid to be a realist: I think you will still be paid somehow:

: "1,000 more billionaires : Maybe the capital is mis-allocated

: "Single Best investment: Sell Yen, Buy Gold

[happy]

Sentiment on the Yen by www.sentimentrader.com;

 

 

It's going to bounce back at some point, at least a little...

 

often interesting to follow up on old charts . . .

 

[drbubb]

A surprisingly Bullish forecast for the Dollar !

 

TONY C: VERY BULLISH on the USD : DXY-$120 (!?)

 

When we started observing the blow off top in the CHFUSD we expected the foreign currency bull market to end, incrementally, with the Swiss Franc in 2011. All foreign currencies did top in 2011, the last being the JPYUSD. This put the USD in a multi-year bull market, lasting until 2017/2018. With all the foreign currencies now in confirmed bear markets. We are prepared to make some projections, versus the USD, for their bear market lows.

 

 

The first projection is the USD itself. With the USD in a bull market until 2017/2018 we expect the USD index, the DXY, to top out around 120. The advance should take the form of an ABC, like the one during 1995-2001. There is lots of overhead resistance between 88 and 92. This resistance zone is likely to end Cycle wave [A]. Then after a quick Cycle correction, Cycle [C] should take the DXY to the targeted 120 area.

 

===

/see: http://caldaro.wordp...rencies-update/

[drbubb]

Copper and GDX are holding better than GLD today, which I take as a good sign

 

GLD got whacked by Bernanke's comment, after a strong start

[happy]

often interesting to follow up on old charts . . .

 

 

 

looks like the proverbial "short squeeze" / unwind in motion:

 

 

 

 

 

[drbubb]

A$ DANGER

 

The Aussie dollar is finding out who its friends are.

 

After the halcyon days of 2011 and 2012 when the high-yielding currency appeared to shed its role as a global risk proxy for one as a minor reserve asset, the Aussie is reverting to its status as a whipping boy for traders.

 

From London to Sydney analysts are rushing to tell clients that the Aussie, the world’s fourth-most traded currency, has only just begun its downward spiral. Not content with a 6% sell off against the greenback since the start of May, bearish analysts argue that a recovering U.S. economy, falling interest rates in Australia and a slowing China bode ill for the trades that fueled the Aussie’s ascent.

 

Australian one-hundred dollar banknotes are arranged for a photograph in Sydney, Australia. Bloomberg News

In the view of Stephen Jen, a partner at London-based SLJ Macro Partners, the Aussie dollar ranks alongside emerging market currencies as being in “grave danger” of a big correction lower.

 

===

/more: http://blogs.wsj.com...s-grave-danger/

[happy]

looks like the proverbial "short squeeze" / unwind in motion:

 

 

 

 

 

 

 

 

 

update: