Evergrande fears fade aiding USDJPY ahead of BoJ
Tony Sycamore September 21, 2021 6:23 AM
Fears of Chinese property developer Evergrande becoming a “Lehman type” moment for markets have eased, sparking hopes of a turnaround Tuesday session in risky assets.
As noted by Canadian Bank RBC, the share price of Evergrande has been under pressure since March, a result of the Chinese property developer colliding with a crackdown on property developers by authorities as part of a deleveraging drive.
Already reflecting a high probability of default, the bond price bond of Evergrande has been trading at a significant discount in recent weeks. Should the situation fail to stabilise, RBC notes that authorities would likely step in to prevent contagion as they did in 2019 with Baoshang Bank.
Additionally, Evergrande does not have the considerable counterparty derivatives risk that Lehman had when it went under. Instead, a good chunk of the money Evergrande owes is to suppliers, construction companies, and buyers of uncompleted apartments, who are likely to be made good by a government bailout.
The return of some relative calm has allowed traders to take stock ahead of the first of this week’s developed markets central bank meetings, tomorrow’s Bank of Japan (BoJ) meeting.
Unfortunately, while the BoJ is the first cab off the rank, it will be one of the tamer events. The BoJ is expected to maintain the status quo across all monetary policy parameters, including asset purchase guidelines and forward guidance.
Turning to the charts after completing a 5-wave rally at the 111.66 high, USDJPY continues to trace out a corrective pullback within a well-established trend channel. A break and daily close above the top of the trend channel, (currently at 110.10) and above recent highs 110.40/50, ideally after Thursday's FOMC meeting, would indicate the correction is complete, and the uptrend has resumed, targeting a retest and break of the 111.66 high.
Aware that while USDJPY remains below resistance at 110.40/50, allow for a retest of the 108.72 low before the uptrend resumes.
Source Tradingview. The figures stated areas of September 21st, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.