USD/JPY: Abenomics effect

12:40 PM

So how far can the USD/JPY go? Let us take a stroll back in history and see what the USDJPY did.




I believe the Brexit caused a rush into USDJPY as a safe-haven currency due to its G3 status. This would nullify the effect of the QE somewhat and the BOJ would not like that. 

However, the BOJ may not have wanted to intervene in anticipation of the upper house election results  So now that it is over, and even though no concrete plans has been announced, Abe has spoken and he aims to continue to provide stimulus to the economy with a new round of QE.

One of the expected effects of classical and neoclassical economics is that currency will weaken upon the use of such fiscal policies that Japan has been using above. 

This in turn should stimulate the economy and help bring it out of deflationary territory and is the goal of "Abenomics"Abenomics has also traditionally been aggressive and I don’t expect it to stop with their next QE or QQE. 

Whatever the case, the last 2 day move was so strong it is truly incredible.  The moves over the last 2 days was greater than what was previously experienced by the market, i believe this is due to the economic backdrop of the Brexit and historical information can't help us here.






3 Day
1 Week
1 Mth
Abe upper house election



4.87 (2 Day Move)
??
??
QE with Negative int rates


-0.7
-0.76
1.25
QE Expanded to 80 Trillion


1.27
2.21
6.06
BOJ Announces QE(60-70 trillion Yen)

3.02
3.34
2.69
10.3 Trillion Yen Stimulus Bill


-0.39
0.9
5.15
Average




1.30
2.15
4.63



I was already in the position before the elections expecting Abenomics, I will look to exit half my position before Friday as i expect profit taking. The other half will be put on a trailing stop and i hope it runs for another month.

Stay safe people!




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