Global Yield Curves

No, I will not tell you that Silver hit $110 and gold broke $5000 because I already warned several times over the past 4 weeks how and why it will happen in videos charts and writing. Instead, we need to talk about the Japanese yen, which dragged USDJPY by 1.7%, the biggest daily percentage decline since August. The reason? The NY Federal Reserve mentioned on Friday the possibility of assiting Japan in stabilizing yen weakness by selling yen. In the United States, the Treasury Department is responsible for setting currency policy and would authorize any intervention, which is then typically carried out by New York branch of the Federal Resereve, which is responsible for international monetary affairs of the US central bank such as currency swaps and facilities to manage dollar liquidity during periods of sharp currency swings such as 11 September 2001, the crisis of 2007-2008 and Eurozone crisis of 2009-2011. The high profile times the Federal Reserve assisted the Bank of Japan in selling yen to stabilise a soaring USDJPY rate were was in June 1998 and March 2011.

The chart below shows yield differentials (US minus Japan 10 yr yield) have dropped sharply as a result of soaring Japanese yields, but USDJPY has not followed lower. Will USDJPY follow lower? Will it retest the 151 trendline support? Our WhatsApp Bdcst Group members already know what I think. It will be a busy week (earnings, Fed and more chatter from Japan).