Intensified Selling in JPY Crosses (4)

Fast and furious. This morning, I thought we might finally get some price support in some of the JPY pairs. Nonetheless, I was right to be cautious. By mid afternoon, the selling action has intensified once again. Some crosses were pushed down over 100 pips in less than an hour and even more afterwards.

Market pulse:

"The risk theme is very pervasive today. As credit spreads widen, we're seeing the carry trade being unwound.''
"All asset classes are moving now. As the equities are coming down, people are paring risks and liquidating some of the carry trade positions.''

Trading update: zero action for today, still on the sidelines. I was being too selective and might have missed some great setups too. There is always tomorrow.

JPY: What's Next?

Be cautious. After 4 days of intense selling in all of the JPY crosses, i think the yen is temporarily at crossroad. There are mixed signals amongst the pairs. Some of them seem to hold out better and have more support than others.

Pair / Yesterday Low/ Today High /Current Price/Current Bias

USD/JPY 119.80 120.73 120.40 Reversed to UP

AUS/JPY 105.34 106.83 106.61 Reversed to UP

EUR/JPY 164.69 165.50 165.27 Still Down

CHF/JPY 98.92 99.42 99.27 Still Down

GBP/JPY 246.28 247.73 246.68 Still Down

Fast Selling in JPY Crosses (2)

Market pulse: Yen Advances to Four-Week High Against Euro on Risk Aversion

"The risk aversion we're seeing is leading investors to reduce carry trades. The yen is benefiting on the crosses."
"Japanese retail investors are selling the yen across the board amid the currency's rally."

Last Friday, I mentioned that we could see more downside in the JPY crosses. Since then, I adhered to my stance and it had rewarded me with +83 pips on the short AUS/JPY position. There were just too many short opportunities around but I could not keep up with the fast selling action. This morning, I missed some good entry points in EUR/JPY and CHF/JPY. Although I am out of position, I feel like I am "in control" and able to "understand" the market.

Significant Break Down in JPY Crosses

Pair / Yesterday Low/ Today High /Current Price

USD/JPY 121.78 122.45 121.25

EUR/JPY 168.10 168.70 167.72

GBP/JPY 249.70 251.09 249.28

AUS/JPY 106.82 107.72 106.77

Initially, I was very keen to buy at this dip if prices could hold their yesterday's lows. The reason was simply to hold some long positions over the weekend to earn me some interests. However, this was not the case, we had some significant break down in the JPY crosses. In my humble opinion, the carry-trade party was temporarily over at least for the next couple of days. At present, I will stick to my negative bias and will not fight this sign. I fear the worst is yet to come.

Tuesday Results

Conservative strategy: +16 pips
Aggressive strategy: + 36 pips

I have summarised the signals for today in here. FYI, I didn't get the expected price action in the USD/JPY and EUR/JPY markets. Only choppy action. I had to exit earlier at +1 and -11 respectively.

Market pulse:

"There is an underlying pattern of increasing volatility evolving. Dollar-yen volatility should lead the way."