By George Koumandaris
The Bank of Japan made it clear that it is willing to intervene in the markets in order to curb the Yen strength. This can translate into a trading opportunity for the USDJPY when coupled with Technical Analysis.
The Bank of Japan Intervention was one of the most interesting events in the currency markets over the last few weeks.
The Bank of Japan implied that they will intervene (sell the JPY) if the price starts to fall below 85.00. The price of USDJPY is around that area now, so if it makes another down leg then the BOJ could potentially intervene again. This should cause the price to post a dramatic rise.
The BOJ intervened in order to respond to concerns about the yen’s rise. The intervention took place on last Wednesday for the first time in six years to knock the currency lower.
Bank of Japan money market data indicated that the yen-selling may have amounted to1.86 trillion yen. This is a record amount that demonstrated to the market that the Bank of Japan means business. This should definitely have an impact on the market’s expectations regarding the Yen.
Prime minister Kan is facing a divided parliament so he wants to show that he is able to take decisive action in order to curb the Yen strength which is hurting Japan’s exports, which are the main driver of the Japanese economy. In addition, a strong Yen may push Japanese firms to relocate abroad as the strong Yen harms their global competitiveness. In turn, this could increase unemployment in the country.
From a technical perspective, the pair has posted a pullback and is now trading around a key support level denoted by Support S1 around the 84/84.50 area. Trade Signals is a buyer around these areas targeting the Resistance R1 area, around the 88.00 area.
This is something I will be watching closely since when you have Fundamental and Technical factors in your favor, the probability of success increases dramatically.
Happy Trading!
About the Author
George Koumandaris, Senior Trader in TradeSignals.com. Has over 10 years experience of bonds and currencies trading. He was trading government and corporate bonds for a big bank as an institutional buy side trader. He has an M.B.A. specializing in Risk Management, Holds a Certificate in Risk Management from New York University (NYU) and certified by CySec and is licensed to Trade several Asset Classes within the EU.
