US Dollar Japanese Yen (USD JPY) Analysis | Xtreamforex
The Japanese Yen is on a wild ride lately. But there were some surprise moves earlier, an explanation of these moves could give some explanation on whether or not the USDJPY has hit a ceiling. There are some important implications for the future of the yen, and something traders need to be very careful.
The yen has been weakening generally because the BOJ isn’t raising rates while other central banks are raising. The BOJ isn’t likely to raise rates in the foreseeable future, which makes the currency ripe for carry trading. The USDJPY spiked higher after US CPI figures came out, because of speculation of an even stronger move by the Fed at the upcoming meeting.
Couples of decades ago the pair moved to similar levels, prompting a response from authorities. In that case, the pair got up to 147.00 and there was joint action from the US and Japan
The Bank Of Japan does conduct the operation, but it’s at the direction of the Ministry of Finance, who pay for the move. The BOJ will buy yen on the market in a very large volume, enough to push the exchange rate down by several thousand pips all at once. The move is not pre-announced, and can happen more than once. The idea is precisely to keep the market from trying to push the pair up by burning out many of the long positions, and threatening to repeat at any moment.
If anyone trading with yen pairs over the next several weeks, as the USDJPY remains close to the 145.00, it’s very good idea to make sure to have an eye on market move and the profile is ready for a sudden large move in currency. If the market behaves as the BOJ and MOF expect, then it’s also quite possible that no intervention happens.