Monday, 31 October 2011

...and it's Yentervention time !

The Bank of Japan has unilaterally intervened on the FOREX market to devalue the YEN last night. After reaching pre-World War II levels, the yen was brought back to 79.15 where the chart turned into a horizontal line for a few hours (signaling a great support level), then trending downwards to the 78.8 level. The devaluing of the Japanese Yen would arguably stimulate the exports and the external demand of Japanese products, but is not a sustainable move since they have large current account and balance of trade surpluses

BOJ you`re doing it wrong

The Japanese finance minister Jun Azumi declared today that they unilaterally intervened on the market to weaken the yen. The weaker Yen would come as a band-aid to the exporters as making their products relatively less expensive. From Bloomberg:

“You wouldn’t want to be buying yen here,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. “At least for the next few weeks, the Japanese might have just created better levels to be buying yen or for exporters to effectively do the same.”
The yen weakened 3.2 percent to 110.72 per euro after Azumi said he will act against speculation and plans to continue intervention until he is “satisfied.” The currency climbed last week even as the Bank of Japan unveiled measures that Governor Masaaki Shirakawa said were intended to respond to the appreciation and fallout from the European debt crisis.

Let`s get a bit technical

The Japanese Yen was approaching the long term bottom of 75.5 against the USD and beneath this level lied the financial no-man's land. In Friday's article I described why is the JPY devaluation imminent. Now what is to be done is to fade the intervention and short the hell out of USD/JPY with a stop loss at 79.5.

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