Talking Points:
• USDJPY and the Yen crosses have climbed between 4.5 and 6.5 percent over the past two weeks
• This fundamental drive has developed on multiple themes and was started by the surprise BoJ QE upgrade
• Extreme monetary policy carries a strong influence, but trend now depends on 'risk' and politics
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The Yen crosses have offered up the heaviest volatility and trend amongst the majors lately. Initially, USDJPY and its counterparts were shocked into action with the Bank of Japan's surprise stimulus upgrade. High-level fundamentals carry certain volatility clout measured by how closely they reach important themes and the degree of the 'surprise'. This move hits both check boxes. However, the other facet of fundamentals is the trend that develops after the initial shock wears off. A policy bearing that is in direct juxtaposition to the Fed and is more extreme than the ECB carries a lot of weight, but its mispricing has been significantly closed. To help fortify the bulls, we have seen a new message step in: political concerns. Talks of a delayed tax hike and possibly a snap election add a fresh, vague driver to the system. What will this mean for the Yen moving forward, how far could it carry this revived trends and can it hold up to 'risk'? We discuss this in today's Strategy Video.
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