GBPAUD Short
Forex Learner
The USDJPY currency pair once again hit a yearly high today, almost reaching 150.8. However, after that there was a sharp downward impulse, the price at the moment fell under the level of 150. Later the quotes stabilized in the middle of the daily range, leaving the question about the fact of currency intervention open. One way or another, the Bank of Japan has more and more reasons to intervene in the current situation.
Niels Christensen, chief analyst of Nordea, considers today's fluctuations of yen exchange rate as usual volatility, not rare at local maximums or minimums. In his opinion, in case of currency interventions the dynamics of the Japanese currency value would be much sharper, such as in the fall of last year. Traders have to wait for October 31, when the Ministry of Finance of Japan will publish the monthly report and we will know for sure whether there were interventions or not.
Japanese officials have so far limited themselves to toughening rhetoric. Finance Minister Shunichi Suzuki warned market participants betting on the yen's fall. According to him, the authorities are closely monitoring the situation and are ready to take appropriate measures if necessary. The need for regulator intervention can be seen by looking at the bond market. Japan's 10-year debt today hit its highest yield since July 2013 at 0.89%.
The falling yen, caused by the large difference between US and Japanese interest rates, will continue to put pressure on the Bank of Japan to adjust its policy of limiting bond yields. According to Reuters, raising the existing 1% yield limit is being discussed as a possible move ahead of the October 31 monetary policy meeting. In any case, the currency market is demanding that the Japanese authorities take action, otherwise USDJPY risks a renewal of last year's high just below 152.
The Bank of Japan may intervene at any moment, so it is too risky to count on a sustained growth of USDJPY above the 150 level. Now the situation is rather in favor of buying the yen with the expectation that the quotes will return to 150.
We can suggest the following trading strategy:
Sell USDJPY above 150.5. Take profit - 150. Stop loss - 152.
Traders can also use Trailing stop instead of fixed Stop loss at their discretion
