Although Japanese officials and corporate Japan would prefer a weaker yen, given the concerns about the impact of the success of the SNB in blocking hot flow entering Switzerland, the stability of the yen must be partly welcome.
The weekly MOF data indicates that Japanese investors stepped up their acquisition of foreign financial assets in September. In fact the weekly time series suggests Japanese investors bought about JPY2.73 trillion of foreign bonds, stocks and money market instruments in September, the most during this calendar year. This is noteworthy also because in September, the end of the Japanese fiscal half year, many expect repatriation not new purchases, and surely not such strong outflows.
In recent weeks, Japanese policy makers appear to have been focusing on other measures outside of intervention to deal with the yen’s strength. The more that there is talk of other action, the less intervention may be feared. There are reports in the local press that a large Japanese bank is considering buying US dollar assets from European banks. There has been other reports suggesting that there may be some official Japanese flows or support for European bonds. This does not appear to be short-term solution for Europe or the yen.
The Yen has remained strong, but stable and the dollar has created a bottom near 76.00. A break to the upside above the 77.85 level, is likely to lead to a test of the last intervention level near 80.50.
The trade – Buy a daily binary call option on a daily close above 77.95. Cap the trade near 78.50.
Signal Summary
Asset : USD/JPY
The trade : Binary Call Option
Expiry time : End of day
When : on a daily close above 77.95. Cap the trade near 78.50.
