Yen

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Cutten

Has anyone noticed the recent action in the Yen?

Today the dollar soared against every major currency on the Fed comments - up 1.5 points vs the Euro, biggest rally against CAD for 5 years, cable and the aussie were also down over 1%.

Yet the one currency that has a central bank selling hand over fist actually ends the day down the least relative to all the others.

In any normal market the Yen would be down 1-1.5 points merely on the Fed comments, and with the BoJ intervention it should be off 2 points at least. The fact that it's barely budging is giving a pretty strong signal IMO.

Every BoJ intervention has followed the same pattern - initial rally, then quickly sell back down to the pre-intervention level. But each time the rallies are smaller and last shorter than before. IMO if the BoJ said tomorrow that it would no longer intervene, you could easily see a 3 point spike in the currency. At current prices it seems like demand is swamping supply, and the only seller is the central bank.

Basically I think there could be a serious rally coming on in the Yen. The risk appears pretty limited, I would say 110-111 is a reasonable stop, or the original 116 breakout level if you want to give it more leeway. You could buy some cheap 111 calls to hedge your risk. On the reward side, I think 101-102 is an obvious target, the high from 1999, but we could easily blow through there and into the low 90s IMO.

Any thoughts? I am already long but really tempted to put on a big position here.
 
I read an analisys that if not for the BoJ intervention, the USD/JPY would be at around the 95 level. I don't know how true that is, but it's an interesting point of view. The BoJ has been defending the 106 level, and most recently the 105.5 level, by selling trillions of yen. So, it makes sense that the USD would not rally against the JPY because the value is artificially high already.

I noticed that the BoJ was clever in one of it's interventions; when the USD rallied (better stated, drifted) up to resistance, the BoJ came in and created a huge stop run spiking prices over 200 pips. I'm curious if they'll attempt the same thing again and push the USD/JPY up to the 108 level. With prices drifting up from support we'll see.

As for the rally without intervention, perhaps, if the USD continued to rally against the other curriencies, i.e, with the USD below 1.20 against the EUR, etc.
 
i think the BoJ weakness story is overplayed here,


on one hand i can't see yen breaking below 0.925 (108)

and on the other hand i think the rumors about the BoJ nolonger willing to support the greenback are overplayed here
, with the yuan peged to the dollar japan has his 2 eggs in the same basket i don't see them giving up on intervention
 
The yen acted similarly after Hussein was captured, only dropping a small fraction of a percent while the other currencies tumbled. There may be a "catch up" factor involved here that might keep a bid under the yen at least until the next G-7 meeting in Feb.
 
Wouldn't buying Nikkei futures be a play on the appreciating yen as well ? Buying the Nikkei at around 10100 levels may not be
a bad idea.
 
Cutten, we are positioned similarly. I've been betting heavy on Yen strength for quite a while now. Many people are afraid to be long Yen due to constant intervention threat. However, just last evening Yen made a new 52-week high. Trades incredibly strong and IMHO a chip shot to 100. If the BOJ said that it was going to stop intervening, I'll sell you $$/Yen all you want at -3 figures. Probably would move like 8-10 figures. However, no chance of this happening. Good luck to us both! Neal.
 
Quote from Chipdude:

Wouldn't buying Nikkei futures be a play on the appreciating yen as well ? Buying the Nikkei at around 10100 levels may not be
a bad idea.
More...

If the dollar was to really tumble it might drag the Nikkei down as well, as exporters usually catch all the headlines and a stronger yen is detrimental to their earnings.
 
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