Forex Flash: Japanese Economic Minister pushes USD/JPY a point lower – Societe Generale
FXstreet.com (Barcelona) - Sebastien Galey, Senior FX Strategist at Societe Generale notes the fear of imported inflation caused the Japanese Economic Minister to speak out to push USDJPY one big figure lower.
He adds, "In an advanced 'carry' trade, such corrections are short and shallow. By that point in time, surviving algorithms have identified the trend and will bid USDJPY on dips." Galy notes that inflows pressure price, creating a self-feeding loop. Macro investors are left to assess whether we are in a phase of consolidation or systematic trading has pushed the pair so far, it will collapse as happened with AUDJPY in 2006 and 2007. He finishes by commenting, "Comparison though is no reason; a carry trade and a change in the expected equilibrium concept for USDJPY are conceptually different."
He adds, "In an advanced 'carry' trade, such corrections are short and shallow. By that point in time, surviving algorithms have identified the trend and will bid USDJPY on dips." Galy notes that inflows pressure price, creating a self-feeding loop. Macro investors are left to assess whether we are in a phase of consolidation or systematic trading has pushed the pair so far, it will collapse as happened with AUDJPY in 2006 and 2007. He finishes by commenting, "Comparison though is no reason; a carry trade and a change in the expected equilibrium concept for USDJPY are conceptually different."
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