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JICPT| US and Japan 10Y spread suggests where the pair go!
Hello everyone. USDJPY has retreated from 152ish due to the intervention of Japanese government. In my view, the intervention may temporarily weighed on the pair, however, it won't prevent it go up further. The possible level it might go is 160.
Why long USDJPY might become the best strategy of the year? Let's look at the left chart, containing two lines, with purple line for spread between US 10Y and Japan 10Y bond yield(risk free assets of the two countries ). It's clear to spot that USDJPY has a very strong positive correlation with the bond yield spread. Japan adopted loose monetary policy with rate at -0.1%. Whilst federal reserve aggressively tightened the rate several times. Big institutions can make easy money by following steps. Firstly, borrow Yen then convert to USD. Secondly, invest US dollar in the US treasury market to benefit from the spread. The first step is definitely put pressure on Yen.
So, if you try to take short opportunities, take a hit-and-go strategy. The spread is expected to be higher because Federal reserve is likely to hike another 75bps in Nov. Don't go against trend.
The entry level for bullish setup on the daily chart would be around 144 below the uptrend line marked on the chart. If the pair misses the zone and continues to create new highs, looking for pullback on 4H.
What do you think? Give me a like if you're with me.
Why long USDJPY might become the best strategy of the year? Let's look at the left chart, containing two lines, with purple line for spread between US 10Y and Japan 10Y bond yield(risk free assets of the two countries ). It's clear to spot that USDJPY has a very strong positive correlation with the bond yield spread. Japan adopted loose monetary policy with rate at -0.1%. Whilst federal reserve aggressively tightened the rate several times. Big institutions can make easy money by following steps. Firstly, borrow Yen then convert to USD. Secondly, invest US dollar in the US treasury market to benefit from the spread. The first step is definitely put pressure on Yen.
So, if you try to take short opportunities, take a hit-and-go strategy. The spread is expected to be higher because Federal reserve is likely to hike another 75bps in Nov. Don't go against trend.
The entry level for bullish setup on the daily chart would be around 144 below the uptrend line marked on the chart. If the pair misses the zone and continues to create new highs, looking for pullback on 4H.
What do you think? Give me a like if you're with me.
plan your trade and trade your plan
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