FOREXYARD: Forex News Blog | |
- BOJ Currency Intervention: What it Means for FX Traders
- EUR/USD – Rallies on Technical Breach but Faces Further Resistance
- Japan Intervenes in the FX Market
| BOJ Currency Intervention: What it Means for FX Traders Posted: 15 Sep 2010 02:55 AM PDT
It didn't take long for forex traders to notice the sharp rise in JPY crosses this morning. But many have expressed a type of unfamiliarity with the politics of Japan to truly grasp what was happening. Let's try to understand what's going on there. First off, Japan likes having a weak yen. In fact, it loves having a weak yen. If the Bank of Japan (BOJ) could keep the yen exceedingly weaker than it currently is, it would. But there is the opposing pull of free markets, and the tenets of an international, free-floating, foreign currency exchange system which demands as much laissez faire as possible, and chastises those who act differently (e.g. China). But Japan is an export-dependent country that needs its currency weak to help its goods gain better access to markets. So the rise of the yen since 2007 (as much as 50% gain on the USD since then) has the BOJ fuming. But what can they do if they want to remain fair partners in the global economic community? Despite the political sensitivity surrounding a bank's attempts at currency intervention, Japan's central bank decided that it was time to step in and weaken the yen for its own economic survival. It's not the first time, either. The BOJ stepped in back in 1999 and 2004, but much earlier in comparison. It shouldn't have come as a surprise, though. Japan has been edging itself towards intervention for some time now. And speculators have been anticipating this move for weeks. So now that it has happened, try to grasp what this means. Basically, the BOJ is selling its own currency, en masse. It's flooding the market with its own currency by releasing its reserves of that currency. The result is what we've seen this morning: mass depreciation of the JPY. We shouldn't expect major changes anytime soon, either. Anticipate a continuation of the JPY's fall going into the next few weeks. |
| EUR/USD – Rallies on Technical Breach but Faces Further Resistance Posted: 15 Sep 2010 02:24 AM PDT
A breakout yesterday during the New York trading session took the EUR/USD above a key consolidation pattern and a resistance level that has held for over a month. In order to avoid a false breakout, the pair will need to close above the long term downward trend line that begins in December of 2009. Yesterday, the pair originally sold off following worse than expected German economic expectations. However, later in the day the EUR/USD rallied after US Retail Sales data helped to boost risk sensitive currencies. This continued the bullish move for the pair and helped push the price above the resistance level at 1.2930 that has held for the last month. The rise in price was as high as 1.3030 and completes the ascending triangle pattern. However, the breakout to the upside was capped by the falling trend line that begins in early December of 2009. This will serve as the first resistance level for EUR/USD at 1.3030 (R1), followed by the low from August 10th at 1.3070 (R2). A breach above the rising trend line would set up an opportunity to go long on the EUR/USD to with a target of R2. But should the rally stall at the long term downward trend line, the recent gains could unravel and the pair may fall back into the consolidation pattern, targeting the rising lower boundary line at 1.2730.
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| Japan Intervenes in the FX Market Posted: 14 Sep 2010 11:04 PM PDT
The Japanese Yen experienced one of its most bullish trading days in recent weeks on Tuesday against the USD. The USD/JPY fell as low as 82.97, its lowest level since mid-1995, after Japan's prime minister won a ruling party leadership vote, reducing the chances Japanese authorities would attempt to stem yen gains. But overnight the Bank of Japan intervened in the FX market to weaken the yen. Another developing trend is the recovery of Gold. Since the Dollar began dropping against the majors, gold has risen further and further. Currently traded around $1268 an ounce, if the Dollar will continue to drop, gold could reach $1280 an ounce by the end of the day. Today's Leading Indicators 14:30 GMT: US Crude Oil Inventories 21:00 GMT: NZD Official Cash Rate |
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