DaveBrascoFX

BRLJPY Long BRL and JPY seen as debt ceiling event risk hedge

Long
DaveBrascoFX Updated   
FX_IDC:BRLJPY   Brazilian Real / Japanese Yen
The international capital movements continue to be driven by carry trade opportunities.

For hedging the debt ceiling event risk, traders like BRL, CNH, and JPY, where the first two provide the right beta to equities. While BRL provides a carry cushion, it is a bit more overvalued in some of our short-term models than CNH. The upside for CNH is likely viewed as reserve diversification hedge to the USD, especially if policymakers take the negotiations down to the wire.”


The Brazilian Real declined substantially after the minutes of the last meeting of the Brazilian central bank (Banco Central do Brasil, BCB) on Tuesday took a surprisingly more dovish tone than the original statement after the meeting had suggested.

A break below 15.425 is the beginning of the bearish trend, and confirmation that the current bullish trend
a bulltrap was...


Real has moved stabil above 22.60 ,made 2HH and 2HL( 23.718 and 24.801)

A break above 31.402, and 2 consequent closing days above this area delivers the final confirmation,
that the Bullish trend has been maintained.

First Traget is 63,546, as the Bears took control over the bulls on August 2009

The strategy is trend following
bullish
we can position size the pullbacks
The stop shall be put as soon as possible on break even ,if we pass 36,7 successfully.

(See green route!)
Comment:
The Brazilian Real declined substantially after the minutes of the last meeting of the Brazilian central bank (Banco Central do Brasil, BCB) on Tuesday took a surprisingly more dovish tone than the original statement after the meeting had suggested. Economists at Commerzbank analyze BRL's outlook.

Real could avoid pressure if today's meeting were to pass off without a hitch
Comment:
Here is an analysis of the positive and negative impacts of a weak and strong Japanese yen on various countries and regions:

Positive Impacts of Weak Japanese Yen:

Japanese Exports: A weak yen can boost Japanese exports by making them more price competitive in international markets. It makes Japanese goods relatively cheaper for foreign buyers, potentially increasing demand and stimulating export-oriented industries.
Tourism: A weak yen can attract more international tourists to Japan, as their foreign currencies can have greater purchasing power in the country. This can benefit the tourism industry and generate foreign exchange earnings.
Overseas Investments: A weak yen can encourage Japanese businesses and investors to seek opportunities abroad. It makes overseas investments relatively cheaper in terms of yen, potentially promoting outward foreign direct investment (FDI) and diversifying business activities.
Negative Impacts of Weak Japanese Yen:

Imported Inflation: A weak yen increases the cost of importing goods and raw materials, potentially leading to higher inflation. This can impact the purchasing power of Japanese consumers and erode their standard of living.
Energy Imports: Japan is heavily reliant on energy imports, particularly oil and natural gas. A weak yen increases the cost of energy imports, which can have adverse effects on energy-intensive industries and contribute to higher production costs.
Consumer Electronics: Japan is known for its consumer electronics industry. A weak yen can increase the cost of importing electronic components and materials, potentially affecting the competitiveness and profitability of Japanese electronic manufacturers.
Positive Impacts of Strong Japanese Yen:

Imported Goods: A strong yen makes imported goods relatively cheaper, benefiting Japanese consumers and potentially increasing their purchasing power.
Energy Costs: A strong yen reduces the cost of energy imports, which can benefit energy-intensive industries and help control production costs.
Travel and Education Abroad: A strong yen can make international travel and education abroad more affordable for Japanese citizens, potentially boosting outbound tourism and educational opportunities.
Negative Impacts of Strong Japanese Yen:

Japanese Exports: A strong yen can make Japanese exports relatively more expensive in international markets, potentially reducing their competitiveness and impacting export-oriented industries.
Tourism: A strong yen can make Japan relatively more expensive for international tourists, potentially affecting the tourism industry and reducing foreign exchange earnings.
Inflation and Deflation Concerns: A strong yen can exacerbate deflationary pressures in the Japanese economy, as it makes imported goods cheaper and can lead to lower domestic prices. This can hinder economic growth and pose challenges for policymakers.
It's important to note that the impact of currency strength or weakness on a country's economy can vary depending on various factors, including the country's economic structure, trade dynamics, fiscal policies, and global market conditions. The effects on specific countries or regions can also depend on their trade relationships, exchange rate policies, and economic interdependencies with Japan.
Comment:
Brazilian Industrial Production Rebounds
Industrial production in Brazil edged 0.3% higher from the previous month in May of 2023, meeting market expectations and trimming the 0.6% decline in the previous month, underscoring Brazil’s strong economic momentum despite the prolonged period of elevated borrowing costs. Output expanded for 19 of the 25 industrial branches, led by growth in the production of petroleum derivates and biofuels (7.7%), auto vehicles (7.4%), and machinery and equipment (12.3%). On the other hand, lower output was noted for food (-2.6%) and chemical and pharmaceutical products (-9.7%). On a yearly basis, industrial production rose by 1.9%, rebounding from the 2.7% decline in April.
Comment:
Trade is open