USD has Wild Ride Against JPY

The US dollar has gone back and forth against the Japanese yen during the trading session on Friday as the Bank of Japan has intervened. This has had a massive influence on the markets as you would expect, as the US dollar got a little too far ahead of itself. That being said, the USD/JPY market has been very noisy, and has plunged down to the 146 region. After that, we have bounced almost 200 pips within the first couple of hours, as the Bank of Japan is almost certainly fighting an uphill battle yet again.

The low liquidity obviously had a lot to do with what happened, but at this point it’s simply going to be yet another scenario where the Bank of Japan is stuck. After all, it’s likely to be a situation where a lot of traders will look at this as a potential value proposition, so it’s very likely that we end up bouncing just as we did during the last intervention. However, you need to keep in mind that the Bank of Japan has stuck to its idea of keeping interest rates down to 0.25% on the 10 year bond, which is essentially the same thing as printing unlimited yen. As long as it’s going to be the case, the union is going to continue to suffer at the hands of not only the US dollar, but most other currencies.

• The ¥150 level will be the next prize, which I certainly think it’s only a matter of time before we get there.
• The market will probably get there over the course of a couple of days, because there’s always a little bit of “shellshocked” after these types of moves.
• Even if we did break down from here, I think it is or likely than not going to be a situation where we will eventually find value hunters coming back in.

The interest rate differential will continue to favor the US, and every time the United States dollar picks up a little bit strength overall, it will certainly be seen over here, perhaps even magnified. Ultimately, there’s no way you can short this market in any time you see a pullback you have to think of it as a gift. The Bank of Japan probably made it easier for a lot of people to hold this pair.

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