The Chart with Two Scales: A Cautionary Tale

There is a common ploy used by many analysts and reporters that often simply does not stand up to close scrutiny, and would in fact be mocked in the university.  The ploy is to take two time series and put them on the same chart but use different scales. 

Such a ploy often is used to demonstrate a closer relationship between the two variables than is actually the case.  A current example is a chart of the dollar-yen rate and Japanese stocks.

Searching for One Yen Narrative is a Narrow View

Every so often, a market move appears inexplicable.  The conundrum now is the yen's strength.  Of course, there are numerous attempts shed light on the yen's rise, but many, like ourselves, are not very satisfied. 

Perhaps part of the problem is that many participants are looking for a single narrative that explains why the dollar peaked against the yen last June near JPY125.85 and fell to almost JPY107.60 yesterday.   However, closer inspection suggests the dollar's decline and yen rise has had several phases.

IMF and World Bank Meetings Likely Won't Alter Currency Landscape

There are three highlights to the foreign exchange market today.  First, the yen is marginally softer.  The yen's strength this month has been the main development.  After making a marginal new high yesterday, some semblance of stability emerged in North America yesterday, and this has carried over into today's activity. 

Dollar to Yen: You're Move is Getting Sleepy

The yen's surge may be easing.  It made a new marginal high in Asia, but it was unsustainable.  Technically, a hammer candlestick pattern may be traced out by the greenback's recovery today. 

Supporting the greenback is the movement in interest rate differentials.  The US 10-year premium over Japan has widened by nearly 10 bp since last Thursday.   Near 184 bp, it is the widest this month.  The two-year premium has also widened at 96 bp.  It is also the widest this month. 

The Pound Moves Higher, Defying Conditions at Home

In an unusual development, sterling is outperforming today.  It rose to a four-day high near $1.4230 on what appears to be mostly modest position adjustment in relatively subdued turnover.  The $1.40 area held on repeated tests in the second half of last week.  Stops were triggered above $1.4160 forcing latest shorts to cover.  The news stream was not particularly helpful with the British Chamber of Commerce warning that the economy slowed in Q1 with the balance of services the poorest in nearly three years.  Meanwhile, UK stocks and bonds are underperforming slight

Long the Loonie and the Yen

Speculators in the futures market were not particularly active in Commitment of Traders reporting week ending April 5.  There was only one gross position adjustment which we regard as significant (defined as a 10k contract change), and that was in the yen. 

Technical Indicators Giving Up on the Aussie Dollar

The yen's surge in recent days has captured the attention of investors and policymakers alike.  It is indeed unsettling and seems to run counter to the economic logic negative interest rates, which the BOJ surprised the market with at the end of January.

The Yen's Rise is Looking for a Good Explanation

The main feature in the foreign exchange market continues to be the surge of the Japanese yen.  A convincing explanation of the yen's strength seems elusive.  Until last week, which means through the fiscal year-end last month, Japanese fund managers have been buying foreign bonds at a near-record pace.

Foreign investors, for their part, have been dumping Japanese shares.  The main buyers of the yen appeared to be speculators, wherein the futures markets, they have amassed a near record net and gross long yen position.   

Japan in a Bind over the Yen

The old head and shoulders pattern in the dollar against the yen is back in vogue.  We first pointed it out the first week in January here.

Recall the details.  The neckline is drawn around JPY116.30 and measuring objective is near JPY107.00.   That target also corresponds to a 38.2% retracement of the big Abe-inspired dollar rally (~JPY106.80).   This Great Graphic from Bloomberg shows the pattern. 

Steady as She Goes for the Dollar

The US dollar is better bid today but remains largely in the ranges seen in recent days.  There a few developments to note, which together are lifting European equities after Asian equities softened. 

First, the API oil inventory estimate showed an unexpected fall of 4.3 mln barrels.  An increase of half the magnitude was expected.  The DOE estimate, which is considered more reliable, will be one of the North American highlights today.