Chart of the Day: Some YEN lessons for the euro on QE…

samurai lessons

Whoosh, the euro is rapidly heading towards 1.10 against the USD. But where could it ultimately go?  Here’s a few charts….

First, the Japanese Yen and note the dates….charts are all courtesy of Bloomberg:

Yep, as soon as Abenomics was mooted in November 2012 the Yen went from 80 to over 100 in 4 months – call it a 25% devaluation.

Now let’s look at recent euro action vs USD:

The euro has in the past 6 months gone from 139 to 111. That’s a 20% move. So, arguably there’s another 5% to go on this trade, for now……

Here’s a more recent Yen chart…

Remember, that 100 level the Yen reached in April 2013? Well it has devalued another 15% in the last 6 months as Abenomics refuelled with more BOJ QE printing. Which brings us back to the euro and memories from the distant past of the euro/USD rate being close to 0.80. Impossible you say? Probably depends whether you believe this first phase of ECB QE works. Now read the ECB statement from yesterday again….. it does say it will continue to work towards a 2% inflation target irrespective of the September 2016 timeline.  No core sovereign bond yield in Europe is currently pricing in that eventuality for September 2016. Just thinking….

Technical Trends

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