Japanese Yen Nearing Escape Velocity

As we awoke last Friday the 23rd of August to China imposing tariffs on $75B of US imports (right before Fed Chairman Powell stated at Jackson Hole that the Federal Reserve will do what it needs in order to sustain the expansion), I noted a sudden sell-off in the USD/JPY …

JUST BEFORE Trump ordered US companies to relocate from China and stop doing business with them.

That is one of the reasons I decided to press shorts intraday and said as such in my live trading room.

Trump went on to badger Powell in a nasty-gram of a tweet:

“WHO IS OUR BIGGER ENEMY, JAY POWELL OR CHAIRMAN XI?” – PRESIDENT TRUMP.

While he ended the day by pronouncing an increase in tariffs on China, he also went on to agree to a trade deal “in principle” with Japan Sunday during the G7 meetings.

The critical $105 level in USD/JPY was in fact defended Sunday and since then markets, and Yen, have chopped sideways. And until this range breaks, we have little enthusiasm one way or the other.

Yen Stays Bid With Gold

Despite Yen and markets chopping sideways since last Friday, Yuan is much weaker and coincidentally Gold/Silver/Miners continue to get bid. In my DailyFX podcast, I gave my case for Gold June 6th. It is still in play for a whole host of reasons, but event risk is a big one. A strong Yuan devaluation, like we had in August 2105, is just one of them. This time the Yuan weakening is being fixed slowly versus all at once and in direct proportion to Trump’s Trade Tariffs.

I also went out on a limb back in early June to also say that I saw the Yen escaping BOJ control and heading higher – likely to hit ‘escape velocity” sometime before end of year:

“I HAVE A THESIS – WAY EARLY – THAT THE CURRENCY MARKET IS GOING TO HAVE A SURPRISE THIS YEAR … WITH A BREAK OUT IN JPY. NOT ONLY IS YEN AT ITS STRONGEST IN TWO YEARS, BUT MY INTERMARKET DXJ:XYJ RATIO WORK HAS BROKEN A 3 YEAR-LONG PATTERN – TO THE UPSIDE. IN FOREX LAND, THAT LOOKS OMINOUS FOR USDJPY BREAKING $108 AND REVISITING THAT FLASH-CRASH PRICE NEAR $105.”

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