Andrew Busch: I Have a Yen for a Mea Culpa
Before last week's Bank of Japan announcement, I believed that the USDJPY would stay in a range of 91 to 96 since I didn't foresee Governor Haruhiko Kuroda going all in on his first meeting. Clearly, I was wrong.
Here's how I described it on Friday's vlog:
It's like getting a date with the cutest, smartest girl, but she says the date won't happen for 3 months. Then when you have the date, you find out that not only is she cute and smart, but also that she is a car mechanic, she likes to do shots and drink beer and she does fantasy football.
In other words, the Bank of Japan exceeded very high expectations.
(Read More: US, Japan Now Global Allies in Money Printing)
Saying this is parabolic is like saying North Korea is unstable: It's obvious.
On Thursday, I wrote that the Bank of Japan went all in at its first meeting. I thought the most interesting aspect was the increase in purchases of ETFs and real-estate investment trusts. Looks like the markets concurred Monday as Tokyo Tatemono,Tokyu Land Corp, Heiwa Real Estate and others were up 10 percent. The risky asset purchases are the major difference between the Bank of Japan's QE and the Fed and Bank of England versions. Remember, the ECB doesn't have a true QE program, only an ad hoc one where they buy peripheral sovereign debt when market conditions become dysfunctional.
In late February, my currency strategy for USDJPY was for it to stall at 96, based on the belief that the market would have their expectations only met or worse at the first BOJ meeting in April. This occurred. What I didn't envision was that the BOJ would go all in on the first meeting. From here, the market strategists are calling for 103 USDJPY and for the Nikkei to hit 14,000.
If I had to devise a strategy for USDJPY, I would look to sell USDJPY over 99 until a close above 100 or I would buy under 97 until a close below 96. These are tough trades to put on, as the moves have been massive momentum trades that don't give you a lot of time to act.