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10 Dec 2014
JPY volatility to remain high – BTMU
Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, notes that high volatility is expected in the USD/JPY pair due to signs of a price correction and the upcoming - general elections and FOMC meeting.
Key Quotes
“The USD/JPY move has been one-way traffic since the surprise BOJ easing on 31st October but yesterday marked the largest turn in that trend since then. From the low on 31st October USD/JPY advanced by 11.6% to the high on Monday. This in fact is remarkably similar to the move post the first BOJ easing in April 2013. After that announcement, USD/JPY advanced by 11.8% - although the 2013 move was over a slightly longer period and did include two phases of modest correction. So comparatively, this USD/JPY move is
more extreme and certainly due for a correction.”
“There are three key risk events that lie ahead that may be now encouraging some liquidation of long USD/JPY positions. The general election on Sunday, the FOMC statement and press conference next Wednesday and now the Greek presidential election that may trigger a snap election early next year. In regard to the FOMC, we note the WSJ article indicating that “considerable time” may well be replaced with “patience” in the statement next week.”
“Whatever the change may be we think the key point is that the change will very likely incorporate a strong message that the FOMC will be ultra-cautious in raising the federal funds rate next year. While the shift next week may well be dollar supportive, it might not fuel a surge in dollar demand.”
Key Quotes
“The USD/JPY move has been one-way traffic since the surprise BOJ easing on 31st October but yesterday marked the largest turn in that trend since then. From the low on 31st October USD/JPY advanced by 11.6% to the high on Monday. This in fact is remarkably similar to the move post the first BOJ easing in April 2013. After that announcement, USD/JPY advanced by 11.8% - although the 2013 move was over a slightly longer period and did include two phases of modest correction. So comparatively, this USD/JPY move is
more extreme and certainly due for a correction.”
“There are three key risk events that lie ahead that may be now encouraging some liquidation of long USD/JPY positions. The general election on Sunday, the FOMC statement and press conference next Wednesday and now the Greek presidential election that may trigger a snap election early next year. In regard to the FOMC, we note the WSJ article indicating that “considerable time” may well be replaced with “patience” in the statement next week.”
“Whatever the change may be we think the key point is that the change will very likely incorporate a strong message that the FOMC will be ultra-cautious in raising the federal funds rate next year. While the shift next week may well be dollar supportive, it might not fuel a surge in dollar demand.”