Charts I’m Watching: Feb 26, 2014

I’ve been watching the THBJPY as an indicator of our EM thesis playing out.  It’s been a pretty good measure of risk appetite (aka Abe’s ability to trash the yen and send hot money scurrying into peripheral markets.)

Like USDJPY, it has rolled over but is being propped up.  The latest stick save came moments ago.

It’s tough to do when the Nikkei is under the kind of pressure it is to complete the right shoulder of its H&S Pattern…

…not to mention the pressure the yen faces since the EURJPY channel broke down.

And, yes, that’s a backtest of the .618 fib of the 2008 to 2012 plunge from 169 to 93.  But, I digress…

THBJPY’s small, white rising channel is trying to hold back a very serious plunge to 2.8 or lower.  Since the rising purple channel broke down around New Years (when most equity markets topped out) the falling white channel has been in charge — but, ran into the midline of the rising white channel for a third time.

It looks like a bit of a standoff until you look at the moving averages.  The SMA50 (blue) fell below the SMA100 (yellow) in July 2012 and the SMA200 (thick red) in Sept 2012.  It bounced back above the SMA100 in November, but crossed back below on Tuesday.

At present, it’s a very bearish alignment of the 20, 50, 100 and 200 — with the SMA10 threatening to roll over.  The last time even the 10, 20 and 50 were in perfect alignment and plunged below the 100, the THBJPY dropped 12%.  This time, they’re below the 100 and the 200 — which, to my eyes, is rolling over big time.

A similar move would take the pair down near the purple .618 at 2.80.  But, of course, it depends on how many fingers the BOJ can come up with.  At present, they’re plugging holes in JGBs (witness yesterday’s bought auction of 40 years at 1.75%), USD (another stick save at 1.20 today for USDJPY), bhat, won, ringgit, rupiah, rupee, Thai and Singapore dollars, etc.  Debt:GDP was around 244% at YE2013.

While Abe is doing all he can to trash the yen, events around the world are conspiring against him.  All those yen he created flooded into other economies, which are now rolling over (Thailand, Singapore, Philippines, etc.)  As risks elsewhere rise, that hot money flows back into the yen — now a safe haven.yen

The afore-mentioned euro weakness will add to the challenge — as will the Chinese recent decision to join the beggar-thy-neighbor game.  Remember, China and Japan are each other’s biggest trading partners.  As the Renminbi slumps, it will also pressure the yen higher.

Stay tuned…




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