The U.S. market is back from the holiday, drawing more attention to the U.S. employment statistics [From Mr. Satoshi Emori's newsletter]
From the real trading newsletter “Tetsuya Emori’s Real Trading Strategy” by Emori Tetsu, provided by GogoJungle, here is a small excerpt from this morning’s dispatch.
〔CURRENCY MARKET〕
USD/JPY drifted with little momentum amid a dearth of cues, remaining in a tight range in the upper 107s. On the 4th, the U.S. market was closed for Independence Day and there were no notable events, resulting in a day with few catalysts. The market is focused on the U.S. jobs report due on the 5th. EUR/USD is slipping in the upper 1.12s. It remains near its two-week lows. Bond yields in the euro area are broadly lower, weighing on the euro. The market sees that the IMF’s Executive Director Kristalina Georgieva, viewed as dovish, being considered for the ECB’s next president would push yields lower and weigh on the euro. It remains subdued. GBP/USD is around 1.2575, near the two-week low hit the previous day. AUD has at times touched two-month highs against the USD.
【Currency Trading Strategy】
Maintain long USD/JPY. Yesterday was the U.S. Independence Day, with little movement. Today, attention will be fully on the U.S. employment report. If the data is strong, expectations for rate cuts may ease, yields could rise and stocks may fall, while the dollar could be bought. In that case, USD/JPY might rise, though the upside may be limited. If the data is weak, expectations for rate cuts may rise, but these expectations are already priced in, so the drop in yields should be limited. A potential decline in the dollar would also depend on how stocks move. However, while rate-cut expectations stay strong, USD/JPY may be difficult to buy and the upside limited. It’s somewhat complex, but I would like to judge after the employment data today.
Additionally, next week there will be Chair Powell’s testimony before Congress. This will likely be treated as market-moving ahead of the month-end FOMC. It will be important to see how the Fed currently views monetary policy. At present, USD/JPY is trading around 108. It is clear that it would be hard to aim higher without breaking above that level. Still, I’ll wait and see a bit longer. I would also like to keep an eye on intraday stock movements today. Japanese stocks tend to dip and then rebound within a month. Ultimately they trend lower, so toward month-end there is a high possibility of a first yen depreciation, followed by yen appreciation. From August onward, the tendency is for a decline, so either way I expect yen strength to increase eventually. If it rises within the month, I expect that to be a peak selling opportunity heading into the summer.
Euro/JPY remains short.
EUR/USD remains short.EUR/GBP remains long.
GBP/JPY remains short.
GBP/USD remains short.AUD/JPY remains long.
AUD/USD remains long.ZAR/JPY remains long.
USD/ZAR remains short.TRY/JPY remains long.
USD/TRY remains short.NZD/USD remains long.
USD/CAD remains short.
USD/MXN remains short.
Emerging market currencies are highly volatile, so keep position sizes to a quarter of those of major currencies. Also, there is no need to force positions.
“Tetsu Emori’s Real Trading Strategy” (Emori Tetsu)Quoted.
Today’s release is the U.S. employment report, which could cause volatility in rate-cut expectations depending on the contents, but the expectation is for only limited moves regardless. With today’s jobs data in hand, next week’s Powell remarks scheduled for the FOMC at month-end will also be watched, so even if you don’t usually trade major indicators, I think it’s prudent to scrutinize the data. (Editor)
