USD/JPY - Too Much, Too Fast

Few will argue that the pair, by any measure, looks extremely overstretched after the algo-feast that took place in the twilight Asian period. If we were to cross-reference the US 30y bond yield (blue line) or the US vs JP yield spread for this matter (both highly correlated), the levels the pair trade at start to look cheap from a macro perspective. If we have a look at the last time the US 30y yield traded this low, any deals sub 110.00 should offer short-term value to engage in buys or else being equal.


It’s also worth to note that correlated risk assets such as the ES mini or gold as the preferred vehicle to seek shelter when the proverbial hits the fan, are relatively stable. Moreover, if we take a look at the latest macro sell-offs in the USD/JPY in recent years, none has really stretched this far (+900p) without a considerable correction. In December of 2017, a very similar sell-side pattern developed, bottoming out at 105.00, precisely the price it has rejected from in today’s massacre.