Hi ppl. I am new member here. I hope this thread will be serve as a platform for presenting our macro views about the world politics, sociology & economics which will then hopefully be used in FX trading. I am a wide believer in macro trading because of the success of those world biggest hedge funds. Anyway, trading macro is similar to trading based on fundamentals/values, isn't it? Instead of examining the individual company's fundamentals, we try to examine the world political/economic trends.
This thread will be used to present my discussion of ideas & predictions of the trending movements of currencies. So that at some point of time in the future, when looking back, I would be able to see if my predictions are right/wrong and learn from that. I would also welcome any contributors to present their views as well.
I start my first discussion today about the USD/JPY. During the last 9 months of stock markets roaring and investing theme of global economic recovery, the USD/JPY still declines. If the global economy really recovers, the USD/JPY should follow it's historic pattern of going up. In fact, during the initial 4 months since March 9, the rate was going up but then proceed its down trend again. This is contrary to the "correct" scenario. My view is that the declination of the USD/JPY can only be explained by that: 1) The recovery is not that strong enough to encourage investments by Jap companies so it reduces their demand for foreign currencies 2) The deflation prospect of Japan and its current account surplus increases demand for JPY as the Jap companies would have the tendency to convert their foreign profits more into their local currency as their "safe haven" 3) The dollar-bashing game & the perception of the "extended period" of low-rate USD has driving down its value, even against JPY 4) The central banks & big players are trying to diversifying their currency reserves out of the Dollar.
All the above 4 factors have been contributing to the declining of USD against JPY which further complicate Japan economy as it needs to protect its export sector. It thus induced the Jap gov to issue second stimulus of 80 billion dollars in new spending. This direct spending amount is just abt 2% of GDP so I think Japan will still have a laggard economy for some time but given the strong intervention of the Jap gov regarding their currency & given the USD/JPY is at it's lowest level in decades, I think it's possible that we have found the bottom of USD/JPY.
I believe we are facing at least a temporary strengthening of USD against other currencies at the moment as the run has been too far, too fast in the last few months. People may have realized that the dollar is not as bad as it seems, though. Furthermore, the fixed rate imposed by the Chinese and threatening intervention by the Japanese would provide further support for the dollar. In the end, when all this hype is over and the Fed starts raising interest rates, ppl will realized that the dollar may not look as bad as it is. In my view, even the dollar continues its decline against others major currencies, the decline would also be limited.
This thread will be used to present my discussion of ideas & predictions of the trending movements of currencies. So that at some point of time in the future, when looking back, I would be able to see if my predictions are right/wrong and learn from that. I would also welcome any contributors to present their views as well.
I start my first discussion today about the USD/JPY. During the last 9 months of stock markets roaring and investing theme of global economic recovery, the USD/JPY still declines. If the global economy really recovers, the USD/JPY should follow it's historic pattern of going up. In fact, during the initial 4 months since March 9, the rate was going up but then proceed its down trend again. This is contrary to the "correct" scenario. My view is that the declination of the USD/JPY can only be explained by that: 1) The recovery is not that strong enough to encourage investments by Jap companies so it reduces their demand for foreign currencies 2) The deflation prospect of Japan and its current account surplus increases demand for JPY as the Jap companies would have the tendency to convert their foreign profits more into their local currency as their "safe haven" 3) The dollar-bashing game & the perception of the "extended period" of low-rate USD has driving down its value, even against JPY 4) The central banks & big players are trying to diversifying their currency reserves out of the Dollar.
All the above 4 factors have been contributing to the declining of USD against JPY which further complicate Japan economy as it needs to protect its export sector. It thus induced the Jap gov to issue second stimulus of 80 billion dollars in new spending. This direct spending amount is just abt 2% of GDP so I think Japan will still have a laggard economy for some time but given the strong intervention of the Jap gov regarding their currency & given the USD/JPY is at it's lowest level in decades, I think it's possible that we have found the bottom of USD/JPY.
I believe we are facing at least a temporary strengthening of USD against other currencies at the moment as the run has been too far, too fast in the last few months. People may have realized that the dollar is not as bad as it seems, though. Furthermore, the fixed rate imposed by the Chinese and threatening intervention by the Japanese would provide further support for the dollar. In the end, when all this hype is over and the Fed starts raising interest rates, ppl will realized that the dollar may not look as bad as it is. In my view, even the dollar continues its decline against others major currencies, the decline would also be limited.