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Gold Yen Correlation
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Gold Yen Correlation

by The MoleOctober 15, 2018

Gold has greatly benefitted from recent Dollar weakness and in particular due to its close correlation with the USD/JPY which began in 2015 and has continued to this day. In fact if you overlay the Yen onto a gold chart then you will see that they follow each other very closely, with the latter usually leading large swings to either side.

The reason for that are mixed and interpretations/opinions are aplenty. But in essence both gold and the JPY are thought to act as safe haven assets, which in both cases obviously is debatable. I frankly don’t really care as all I worry about is how to take advantage and further my ongoing mission of nefarious market domination.

But in Β case you care: my take is that the Yen and gold continue to move almost in unison is because the dollar/Yen exchange rate is driven by a similar underlying force as gold: real interest rate expectations which in turn is tied to anticipated inflation. This holds especially true for FOMC, BOJ, and ECB interest rate announcement days, which produce almost identical swings in both gold and the Yen.

Now on the USD/JPY side of things we’ve been seeing a pretty systematic sell off over the past two weeks which I believe will probably get us to near 111.50. As you may recall, when the cross broke out initially I was proposing such a scenario in hopes of being able to find a juicy buying opportunity near the red neckline I drew on the weekly chart.

My approach over the coming week will be to monitor the Yen for a drop to near 111.50, preferably followed by a nice spike low and perhaps even a small retest. From there I will look at acquiring a few small long positions in hopes of a reversal move higher. Which isn’t guaranteed of course but this is the idea.

On the gold end f things we are already pushing into possible resistance on the daily panel, although I must admit that this 100-day SMA has not been touched less than a porcupine in a petting zoo. So here we’ll have to wait for a Yen reversal confirmation before even thinking about short positions.

I don’t have much to add in respect to equities – the thoughts I posted last Friday still hold true. However one chart is probably well worth observing and it’s the volume profile on the E-Mini futures. We are looking at quite significant historical volume all the way through 2700 and IMO a breach through that mark would most likely unleash the hell hounds.

Until that happens lottery ticket fishing is permissible but I would recommend that you keep your position sizing small and your stops two extra bagel throws away. Come to think, I keep saying that a lot over the past few months – it’s been a rough trading year and I hope you all managed to make it through with your trading accounts intact.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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  • http://gerb-reloaded.blogspot.com Gold_Gerb

    /ES
    the only thing I could add, is there is room for intra-daily scare factor.
    (ovals)
    -GG
    https://uploads.disquscdn.com/images/3d73dfab54131334a5b49798a460cc1247a963cfa7456cf405ae4361bc019582.png

  • Ronebadger
  • Mark Shinnick

    Yeah..This ES supportive zone is made up of a number of various technical tools as well. Its as though last week was like removing froth off the top.

  • HD

    HD Mod β€’ 25 days ago
    BTC pierced its 2 year TL yesterday and appears sharp rejection of those lower prices. Above 6600 may get a rally going.

    https://uploads.disquscdn.com/images/84d7dee24693735c365e79499f47d8e699e5767675eecc2e3593640e5ce95d03.png

    Potential for this pattern to have woke up, finally.

  • HD

    ES did an almost perfect -(233) fibo
    I was 11 point early, 2929

  • HD

    big bounce off 2-4 TL, per the EW

  • maxcherry
  • bankwalker

    short /NQ @ 7080

  • HD

    Mole did a post in late Sept, referencing the “chronic bearishness” here and defined bear moves above >30 VIX.
    IMO VIX 30 is closer to a low than the start of a bear move.

    Interesting…. 30 is also HWB years range and nearly marked the low to the tick. so far…
    https://uploads.disquscdn.com/images/d45e7cf6b529150f89ce67d1934b9978a5932fc7aec89dd73a8af6de191e8975.png

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • HD
  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • HD

    Lastly, In Sept Julie and I were discussing the time that SPX has spent above all the MA’s.
    There is a study in time for how long an index can go without touching an MA. IMO it is best practice on the DJI weekly. That MA was 25180

  • BKXtoZERO

    sold NUGT 16.66 from re-entry of 14.5. Having a good time!

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ..should we be addressing the elephant in the room?
    the weekly has been crossed.

    it may not be the end of the World, but it took a long time to recover.

    https://uploads.disquscdn.com/images/a8d85a716fe6fb4a98c4cefb62506bef67e348d165e4d0edeedde160c1b7ae3d.png

  • BKXtoZERO

    Long SQQ 13.44 just now, already long from Friday 13.2 but missed selling it, stop for me is tight, 13.2 area

  • Mark Shinnick

    I’m long labu

  • BKXtoZERO

    just looking at lower high here on NQ, any higher much over 7160nand I am oot. Simple man, simple plan

  • Mark Shinnick

    Yes. Be sure to keep plenty of dry powder.

  • BKXtoZERO

    very high cash levels. thanks

  • HD

    $AMZN closing EW analysis from Symmetry in Sept. 1740 cut and continued all the way HWB 1700. πŸ™‚
    https://uploads.disquscdn.com/images/b18b6215f8073fa25a8ad630b023096fe21c21d82581c271853dfb7fc419c89b.png

  • https://evilspeculator.com Sir Mole III

    Ho hoooo – lazy Monday or where’s everyone?

  • Wave_surfer

    Is there probably going to be a VIX buy signal generated today? It is hard for me to see well with the almost vertical VIX bollinger band.

  • https://evilspeculator.com Sir Mole III

    YES – I was planning on posting about this tomorrow morning. Assuming the VIX does not jump EOD.

    https://uploads.disquscdn.com/images/042d521f857530afcae720ea93b35d9f0e1dcb3d5e1cdd66a0411564700a2c0b.png

  • HD

    Going to give oil another chance. Will start EW from here. Sitting on support of previous high. Was not expecting the HH. It has an abc look. 77 is a giant numerology price. Above that is wrong, again. Looking for previous 4th if S if broken. Showing USO. https://uploads.disquscdn.com/images/4ced5140f164c8a1c4c5c6a2b880ca85396b7437544e73ce6f7c40b67152c9d4.png

  • https://evilspeculator.com Sir Mole III

    Wave counts… yuk… I just ate!

  • HD

    Snake oil for dessert? πŸ™‚

  • HD

    SPX about to bump the first level for the 4th time. GANN rule of 4 on deck.

  • maxcherry

    spy is trading below maxpain (285.50) very rare that happens going into expiration, there is a large block of puts at the 280 strike. a shake out before heading lower

    https://uploads.disquscdn.com/images/24f1aef090ac37c2ead1c7cc00b0cbc2f03731d9a01aa2cd68c70dc2abef01ff.png

  • Mark Shinnick

    Yes, I see 280 as important for other reasons too.

  • Mark Shinnick

    Its a little like comparing German-like against Italian-like characteristics. πŸ™‚

  • HD

    17 point hit, 20 point rally, 17 point hit, 20 point rally. Enough action for me today.

    Turn around Tuesday next.

  • HD

    Itsa spicy Schnitzel

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    off to lunch!

  • Julie 35 – 25 – 36

    2808 was a target posted 2825 was another target. Looks like a triangle to go lower
    JULIE

  • Julie 35 – 25 – 36

    Chief Great post Gold – Yen Also an inverse correlation TNX and Gold
    JULIE

  • ridingwaves
  • Julie 35 – 25 – 36

    USO 14.62 target for an impulse down then a bounce to a shorter high for a great short if not short already
    JULIE

  • Julie 35 – 25 – 36

    Hi RW Glad you watch COT Reports too Good work RW
    JULIE

  • Julie 35 – 25 – 36

    Chief I also insert the 10 ema i.e. percentage above and below in addition to the bollinger bands
    JULIE

  • Julie 35 – 25 – 36

    Guys Possible bounce banks BAC RSI @ 29 MACD at a level where a bounce can occur. 2nd test of approx 27.50 support. The possible bounce completion is a short Julie over and out Going to be a very busy week at work
    JULIE

  • Julie 35 – 25 – 36

    Hi GG Super busy at work this week .. Love this market GG
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    try to quantify the ‘why’ you like it.
    (I know, pretty tough for a blonde)

    It will become useful to understanding yourself.

    https://uploads.disquscdn.com/images/3b5eafed0d7a3af11f9bb8e666547636a08b2f7ca0c25ac9846786a878d5387d.png

  • HD

    Hi Julie. We got an elk down this weekend. The freezer will be full for a while. πŸ™‚

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    bollingers are just too damn squeezy!

    ema envelopes..
    https://stockcharts.com/h-sc/ui?s=%24VIX&p=D&yr=1&mn=0&dy=0&id=p91122370432

  • HD

    All you VIX wankers. 2 days left on the /vxv. I suspect TVIX and UVXwhy already rolled to /vxx /vxz as to why they are not doing as bad today. VIX 15 then VIX 50 imo.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    better your freezer than my grille.

    FYI – fresh snow on the peaks up in Flagstaff yesterday.
    http://www.indigenousaction.org/wp-content/uploads/san_francisco_peaks_1.jpg

  • BKXtoZERO

    I am giving gold a rest after 2 hits…. This bounce may be bull trap.

  • HD

    We were lower but that storm made for a Harry hunt. We were camped way back on a primitive road. Dragging a camper off the mountain in soupy mud was a little dicey. Got it done though. 3 more tags this year in our group.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • HD

    Man that would have been nice. That’s how they do it in NZ.

  • BKXtoZERO

    Kind of an annoying day…. Someone do something…. Chop… Arg.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    there’s not much on the calendar for the rest of the week.
    Except FOMC Wed.

    https://finviz.com/calendar.ashx

  • BKXtoZERO

    Tweet. We need a tweet!

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    You mean a Trump tweet?

    not a broken McDonald’s tweet. (below)
    https://amp.businessinsider.com/images/5a1853c7f914c359018b5e74-960-720.jpg

    FYI – the ice cream machine was broken in Flagstaff.

  • HD

    OPEX week. Rules engaged. Review previous. All year very consistent.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    just keep those hottie’s with bodies charts a coming!

  • BKXtoZERO

    Ya.. Maybe something about Leslie stall being an obnoxious cow….that would get the mkt moving.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    time. check.
    Zzzzzzz.

  • HD

    Cash market solid rejection of first level, noted earlier. Globex con job on deck?

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • HD

    17 point hits putting people to sleep. Insatiable market. Scalper/ day traders wired and noisy. MOAR

  • ridingwaves

    nope, the saudi killing of us reporter will though…

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • ridingwaves

    I think Master Yoda mentioned Chinese selling treasuries last week as possible reason….just read where this might be in play, putting it into supporting Renminbi….now imagine SArabia joining them if we sanction them for reporter death…..that would be very hard times for treasury market bid ask….my 3K spx hopes are getting washed around by flash floods….

  • Ronebadger

    Watch the VIX final reading later…it MAY actually close up and not be a “Step 3 Buy Signal” (it’s down less than 1% right now)

  • bankwalker

    exit /NQ @ 7076

    + 4

  • Julie 35 – 25 – 36

    Great HD We have two deer no elk yet. General hunt ends the Sunday following Thanksgiving Plenty of time left for elk in MT
    JULIE

  • ridingwaves

    but OB is fall fun with SW groundswell and east winds..so life is good
    https://www.surfline.com/surf-report/south-ocean-beach/5842041f4e65fad6a77087f9#

  • Julie 35 – 25 – 36

    SPX Another leg down targets weekly upper cloud boundary approx 2700 OR the weekly 89 ema corresponding with the weekly lower cloud boundary approx 2617
    JULIE

  • Julie 35 – 25 – 36

    EDIT Miss type weekly upper cloud boundary and weekly lower cloud boundary
    JULIE

  • Julie 35 – 25 – 36

    Everyone Have A Great Rest Of Day
    JULIE

  • Julie 35 – 25 – 36

    Hi RW EXAS looks like a bearish impulse down to daily lower cloud boundary and 64.50 price target Going to short the lower high on a bounce If a bounce now targets for a lower high are 70.52 and 72.79 EXAS could go a little lower to approx 62.23. then the bounce
    JULIE

  • BKXtoZERO

    I squished a few spiders at my place!

  • ds2

    Does lower by a penny count?

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    man, I hope that’s a misprint….or something….maybe?

    https://uploads.disquscdn.com/images/d8d014449e7495533aa0de257e250b904e167046322ef8f074579f8b3b0dfc64.png

    what! too DARK?

  • Julie 35 – 25 – 36

    Hi GG Not a misprint. Do you remember the World Famous Julie’s Yield Curve Exit Indicator that I presented months ago ? Well it gave the warning approx 2 weeks in advance along with the GVIP. This correction will be deeper than anticipated
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    Well! that will teach me to listen to blonde more often! LOL.

  • Julie 35 – 25 – 36

    LOL! GG You have a great week GG I am only going to be able to check in occasionally this week Very busy at work this week. Following week should be back to normal
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    promises. promises.

    EDIT: do post that GVIP’y again some time.

  • Julie 35 – 25 – 36

    GG Watch BKX and BAC this week Very important. RW You and myself pointed out the discrepancy between the rising bond yields and the under performance of the banks in correlation to the rising yields. GG Huge red flag that you RW and myself commented on The Chief Yoda BK BW HD Mark were watching too. We had this move down nailed GG
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    you are correct, we could smell it.
    the speed of the move was extremely fast, even for elevator speeds.

    5 year weekly BPSPX chart
    https://stockcharts.com/h-sc/ui?s=%24BPSPX&p=W&yr=5&mn=0&dy=0&id=p34026304719
    edit: only 3 or 4 times in the last half/decade.

  • BKXtoZERO

    There goes the sheep’s 401ks

  • BKXtoZERO

    My target is zero

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Ronebadger

    That’s a tough one….not a real definitive signal, but technically it’s a Step 3…we’ll have to wait and see…

  • https://evilspeculator.com Sir Mole III

    WOW – scary!!