RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Currencies

Currencies: A Race to the Bottom

Posted 03/15/2019 9:01AM CT | John Caruso

Last night the BOJ left monetary policy UNCH and downgraded its outlook for the Japanese Economy.  JGB Yields are expected to stay tucked in around 0% and asset purchases will remain at 80T yen annually. The BOJ has been at this for a while now and there seems to be no end in sight for its devaluing of the yen and interest rates. The yen is trading higher this morning, as its our contention that this was widely expected by market participants and likely priced into the market as the yen has slid over 400 ticks from its Jan 3rd high vs the Dollar of 0.009458.  The yen is trading 0.009030 +16 ticks on the day. We do believe this could set off a short covering bounce or a “sell the rumor, buy the fact” type trading action. Furthermore the yen carry trade is something we’re carefully watching as the U.S. Fed statement (due next Wed) will likely confirm their “wait and see” i.e. dovish approach to monetary policy.  It’s our contention that the yen can stage a recovery over the next few months vs the USD. 

Similarly to the BOJ this morning, the ECB downgraded their outlook to the European economy as well as struck an increasingly dovish tone towards forward guidance in monetary policy adjustments. Mario Draghi (ECB Chairman) also mulled the idea of additional stimulus – even in light of ending its QE asset purchases this past Dec.  This set off a nearly 200pt sell off vs the USD, but has since recovered as the US FOMC is now in the forefront of what traders are focusing on.  It our contention to continue to look at trading the Euro vs USD with a bearish bias in the near-term. 

Euro FX Jun ’19 Daily Chart

Euro FX Jun '19 Daily Chart

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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. Prior to becoming a broker he did some individual trading on his own, where he first began to study and interpret different market strategies and ideas. In 2006 John moved over to Lind-Waldock where he began to service clients as a professional broker. He joined RJO Futures in 2011.
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