Friday Paper Charts
December 8, 2023
Happy Friday to you, and welcome to all new readers who have joined this week. There was no mid-week update, as some of you have noted. I typically post it only if something new has been happening that I want to comment on or when and if there is a change of direction or exhaustion in one of the prevalent trends.
The JPY took a few by surprise yesterday after it rallied more than 2% - the largest one-day move since January 2023. BoJ’s deputy governor's comments on Wednesday catalyzed a sell-off in the bond markets, while an article in Nikkei opened the door for more hawkish speculation around the exit of negative interest rate policies, which is well overdue. There was also a weak, long-end JGB auction, which added fuel to the fire.
This now raises the probability of an imminent rate move, maybe even at the BoJ’s December meeting in 10 days’ time. The BoJ doesn’t do things hasty, a few planted articles there normally pave the wave for a policy change. The market currently prices an exit from their -0.1% policy by April 2024. Given the JPY’s funding status (borrowing in JPY is the preferred way for unfunded carry trades), reverberations might be felt across global markets. So far, there is no read-through to any meaningful market. Maybe the JPY-based carry positioning is not as extreme as feared.
The momentum model had switched to long JPY on November 20th after riding the swing higher for most of the year. We are now sitting just above the 200 ema after trying twice to take it out. Meanwhile, we have a reversal window opening up, which means that long JPY shouldn’t be too greedy at this stage. Patience is warranted.
The above chart is just one of more than 100 that I provide weekly and more timely when the model alerts us. This is an unfiltered, objective assessment across the global macro space, with typically a few interesting set-ups appearing regularly.
Let’s now dive straight in and see what is being flagged this week. I have added a new X-Market ETFs section, which I will be adding more tickers to in the coming weeks.