Weekly TWI JPY FINALLY Set to Rally
March and April were bad months for my trading, but I still have factual reasons to believe that my thesis still holds in JPY strength.
It was a rough 2 months for me trading the JPY. I lost in USDJPY when trying to short the pair; however, the JPY trade-weighted index is now at a weekly . It looks like it has found support here for now.
(1) The economic indicators still support JPY strength.
(2) A global power shift is coming, as highlighted in one of my blogs.
(3) As mentioned before, the JPY index did not rise as much as JPYUSD . This was due to US dollar weakness in the year 2017. The JPY index itself only rose around 3%. JPY is still undervalued relative to the JPYUSD exchange rate.
(4) Japan will start to move from negative interest rates by next year.
(5) The US Treasury released its 44 page semi-annual report to Congress reviews developments in international economic and exchange rate policies across the United States’ major trading partners.
I can read it here >>> Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States: https://home.treasury.gov/news/press-rel...
The first 15 pages of the report highlight US trends, international trends and trends and conditions with their trading partners. The report touches on capital flows and is a great article to read. I am still in the process of reading it. On thing to note is the powerful message in its executive summery: "The global economy accelerated in 2017 to its fastest pace of growth since the post-crisis rebound in 2011. The broad-based strengthening of growth was led by the United States,
where domestic demand growth averaged 3 percent over the last three quarters of the year, and by a synchronized expansion in Europe. "
In its trading partner section on page 17, one thing sticks out when they speak about Japan. It is its attractive current account surplus! See this: "Japan’s current account surplus increased to $197 billion in 2017 (4 percent of GDP) from $189 billion in 2016 (3.8 percent of GDP). The elevated current account surplus continues to be driven primarily by high net foreign income, which accounted for over 80 percent of the overall surplus in 2017."
This is just the tip of the iceberg. Japan's economy is reforming for more stronger growth. Possibly the year 2018 could be the global shift in power to Asia after all. Whether or not it will show up in the exchange rates being affected remains to be seen. It is showing up in a few xxxJPY short positions that I am already in, but I think it is more due to weakness in the other country's currencies and not necessarily strength in the Yen itself. The Yen itself has been quiet and slowly pulling back to support in April, selling off. Now, from here, I expect to see a rally in the Yen trade-weighted index.