AUD/JPY, GBP/JPY - why are they down the toilet?

[snake86]

Hi all,

I see that the JPY crosses have taken a lot of flack since Thursday. Does any of my learned friends out there have some form of theory on this? Could it be a ripple effect due to the USD/JPY going down the toilet?

The Daily Pfennig mentioned that because stock markets took a tumble, the high-yielders went down the drain.

Any information would be appreciated. I am interested in the GBP/JPY and AUD/JPY trades. I can understand that the former is taking flack due to UK economic indicators HOWEVER, the latter seems to be also suffering quite badly (~400 pips off its highs)

Regards,

Snake.

 

[counter_violent]

Well there are others here far more knowledgable on these global issues, but heres a potted explanation of what's going on.

U S is in the mire economically
U S growth forecasts down the pan due to bad debt, sub-prime, credit crunch
U S cuts rates to encourage people to carry on spending money they don't have
U S cuts rates drastically in an attempt to avert a recession
If U S sneezes, the rest of the world catches a cold
Money and Investment follows the currencies with the highest interest, so if U S is chopping rates then the natural flight will be away from usd ( weak )
All countries therefore linked economically to U S will be forced to follow suit by cutting rates to stimulate their own economies ( weak )
The carry trades against jpy start to unwind, not because Japan ( not strong ) is doing better economically, but because they don't have any room to cut rates ( 0.5 or 1% ) currently

The whole world economic situation could become a big mess and very quickly, if in fact we are not already on the slippery slide.

 

[ampro]

The points which counter_violent makes are valid & out there for all to see.

But you're also dealing very directly with folks emotive states. Never underestimate the power of the dual whip which is fear & greed.

You got head honcho's of respective Central Banks, talking heads from all the top tier fund houses & doom mongers constantly chattering to the wires, spinning their own agenda's at appropriate times to try gain an edge out there.

There are pools of players who actually take all that stuff on board & add to the noise by encouraging it, LOL.

It all plays out in the bigger scheme of things. But fear usually heads it all up. That + large bunches of tiered stops building above/below certain crossroad levels on the pairs, (particularly as prices pierce fresh highs/lows) & once they start getting poked things can unravel pretty fast & get ugly even faster.

 

[snake86]

Thanks counter_violent and ampro.

I am aware of the points that counter_violent has laid out. It seems the gyration that AUD/JPY has seen seems to be quite a huge one. Though I know one shouldn't be rootin' & hoping, I am anticipating a strong return of AUD/JPY to previous levels, though not so sure about GBP/JPY.

Does anyone have views on Carry Trades pairs and trading them, stop loss sizes (wideness). It would be nice to see views being shared out there. It seems one cannot apply the same risk management tactics to Carry Trade currencies because of their inherent volatility!

Just my perspective so far, any additions to this thread would be welcomed.

Cheers,

Snake.

 

[EWave]

The drop in Cross/Yen was due to a combination of factors, carry trade unwinding on risk aversion, more credit issues, and stock market losses.

The high yielders like AUD, NZD, faced some selling as well. The CAD was weak on risk aversion too.

Speaking about carry unwinding, I would imagine the EURJPY and GBPJPY will really suffer in the coming weeks and much more unwinding expected. This will be the case with any high-yielder as well.

Technically, usdjpy weakness is seen until 102 at least.

 

[ampro]

Does anyone have views on Carry Trades pairs and trading them, stop loss sizes (wideness).

It seems one cannot apply the same risk management tactics to Carry Trade currencies because of their inherent volatility!

I'm sure you could fill a sack with all the differing views & tactics on how to trade them, but they won't mean diddly squat to you I'm afraid, unless you're mirroring the exact same strategy play & possess the mental (psychological) disciplines as one of the posters.

How you execute & manage any of the particular (carry biased) instruments will surely be directly influenced by your trading aims & expectations?

If you're gunning one of those pairs via a fast(er) timeframe outlook, then your whole strategy play (incl: entry-management-exit etc) will be entirely different to the structure employed when planning a longer potential profit journey.

As you say, risk management will be key in your planning, so too will the average (daily/weekly/monthly) range extremes & the big psychological levels up & down the ladder, which house the major fulcrum zones.

Depends what you want from the trade I guess.