By: Christopher Lewis
USD/JPY is a bit of an issue for many traders. The pair in the best of times is volatile, and it seems that a lot of new traders tend to get far too interested in the idea of a central bank wanting to devalue its own currency, as the Bank of Japan does. However, once you get past that – it is the same as trading any other pair, save the fact that is normally moves kind of quickly.
This hasn’t been the case though lately. The pair is essentially dead at this point in time, and looks very tame compared to pairs like the EUR/USD. As someone who has been trading for a few years, I can assure you this is unnatural to say the least. The EUR/USD is known for being “reliable” while the USD/JPY was always considered a fast mover. My how times have changed…
The market had been relentless in its selling of this pair over the last couple of years. However, the Bank of Japan has intervened a few times to slow the market down. It seems that lately the traders are taking this serious, as the market has essentially flat lined over the last several months.
Another Intervention?
We are sitting just above the 76.50 area on the charts right now, and this marks the start of serious Bank of Japan movements. Normally, the central bank will start to talk about the “value of the Yen not reflecting true economic conditions in Japan” or something similar when the BoJ is thinking of getting involved. For all of its perceived sneakiness, the BoJ is incredibly transparent if you know to listen for certain phrases.
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The area we are getting to is where the chatter starts to pick up the most, and the fact that the pair can’t fall too far below the 77 mark suggests that perhaps the BoJ is doing clandestine buying at that level as well. It wouldn’t be out of the realm of possibility.
The pair looks like it wants to drift lower. Pay attention to Japanese Financial Ministers and BoJ members speaking of Yen value. While they will rarely say something and do it right away, it shows that the BoJ is getting ready. Normally, they will mention it a couple of time before acting. But beware – we are getting close to those levels again. I am going to buy this pair once we get a comment or two out of these guys, and on a supportive candle. Mind you, this isn’t a long-term trade; it’s a quick move for a few hundred pips.