USD/JPY now up more than 1100 pips from election-night lows
No market moves in one direction forever.
USD/JPY is up another 117 pips today to 112.33 as it busted above the April and May highs. The pair has only declined three times in the past 14 days and for all three of those declines were less than 20 pips.
It's a one-way trade on the belief that Republicans will spend, taxes will be cut, the Fed will hike, regulation will be cut and the US will grow faster.
Ultimately, the move is based on assumptions and beliefs about what Congress will do. At some point they will have to deliver and between now and then there is plenty of time for cold feet.
In the immediate term, the Thanksgiving holiday and long weekend could be adding urgency for US dollar buyers. In some ways, the quick squeeze higher today is also indicative of a top but I don't think that's what's happening.
This market really wants to believe in Donald Trump and every day another prominent economist is boosting his 2017 forecast. The Fed is another tailwind with the market pricing a December hike (and more beyond it) as a sure thing.
There isn't much standing in the way of USD/JPY right now. The high today of 112.47 edged through the 50% retracement of the June 2015 high to the June 2016 low. The level is 112.44 and that's one to watch on a closing basis.
Beyond that is the cluster of highs from Q1 around 115 and the 61.8% retracement at 115.61. I think that's a better spot to position for a retracement.
Curiously, for USD/JPY traders, the other place to watch might be EUR/USD. That pair is quickly approaching the 2015 lows and how it breaks will surely dictate the next broader USD move.
