Algos Still in Charge

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Since reaching our 111.60 target (the yellow .500 Fib) on Feb 11 [see: USDJPY Finally Relents] USDJPY has managed to maintain upward momentum — though it’s struggling a bit today.2016-02-17 USDJPY daily 0615CL has likewise been on a tear since reaching our 26.22 target (the yellow .886 Fib.) 2016-02-17 CL 60 0615It goes to show that algos are alive and well and very much in charge.  But, can it last?  We’ve seen over and over again how TPTB can push prices one direction or the other by manipulating algo inputs — primarily USDJPY and CL.

But, they face basic economic limits.  As the BoJ further devalues the yen, rising oil prices start to bite even more than they otherwise would. There’s a natural limit to how far they can push them both before real damage is done.

As we’ve discussed countless times, the BoJ has painted itself into a corner.  The BoJ can ramp up USDJPY and save the huge securities portfolio that totals over 15% of GDP, but it’ll further decimate what remains of the real economy.

The ECB and FOMC are on the same path, by the way.  It’s just not as dire, given that the debt levels aren’t as stratospheric…yet.

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