The Japanese yen appears to be breaking out over an old swing high made back at the end of November 2017. I’ve highlighted a bullish view on the yen in my previous two articles, right about at the time Japanese GDP and Inflation gauges began to accelerate. My decision making process largely hinges upon both the growth and inflation outlook for a country and it’s currency. This is the best way to forecast what the next major move will be by central bankers, and in this case the Bank of Japan. The BOJ tweaked its monetary policy earlier this week by tapering its government debt purchases by $10 Billion. The highly in volatile and manipulated JGBs (Japanese government bonds) shot up 4 bps fueling the move higher in the yen. However, before we get ahead of ourselves, the BOJ is still the most accommodating central bank in the world. So yen bulls are still not out of the woods quite yet, but I do believe that this move by the BOJ sends a powerful signal to investors. Furthermore, according to CFTC reported positioning to start the week, the Yen was one of the largest consensus net short positions in the report. This is also a key signal we’ll watch for overcrowded positioning in the markets, which can support a sharp reversal in positioning if the fundamentals of the the market change even just the slightest bit.

Looking forward, we expect some back and fill in the yen as it signaled immediate-term overbought this week, but we will be watching the charts for more buying opportunities on pull-backs and, as always, we’ll let the fundamental research and data dictate the direction in which we position. First resistance is 90.50 and first support is 89.70.

Japanese Yen Weekly 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. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.

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