After a period of time during which everybody was “comfortable” with Japanese Yen, the currency is becoming center of attention. Recently Bank of Japan became vocal about strength of JPY, and not in positive terms. Probably to prove their resolve, BoJ called an emergency, or unscheduled, monetary policy meeting earlier today. What came out of it was less than compelling. Preferable tool to use would be cutting interest rates, but those are already near zero and pushing them down farther would be largely symbolic. Rates were left unchanged and central bank provided some additional short term liquidity. Most see it as a mixed message and not likely to have any lasting effect. I’d expect intervention rhetoric to heat up soon.
No such inconclusiveness in Australia. The Reserve Bank of Australia raised interest rates again, for the third time in as many meetings. It currently stands at 3.75%, after a quarter point bump. Australian Dollar appreciated somewhat, but not in the way as before, after previous increases. For right now, AUD rally looks very orderly and more like a correction to the sell off from last week. Next 2-3 days will decide if this is up move is sustainable, or will reverse and resume down trend.
The same can be said about New Zealand Dollar. Analysis done in After the sell off post apply to both of these currencies. For now they are still valid. NZD has strengthen against most currencies over last few days, with an exception of Canadian Dollar. Hourly chart of this cross shows a pronounced bottom forming here. I think this presents good short term buy opportunity. If price breaches 0.7630, I’d like to be in on it and try to meet 0.7720 or so objective.
Can’t speak for others, but I was a little surprised by how NZD behaved today. After all, it was AUD supposedly getting a boost from rate increase, yet Kiwi managed to get rally in relation to Aussie., as this chart shows. One could try to sell it again at about 1.2660 and look for about 70-80 pips. Personally, I’m not committed to do anything here. It will depend on how much spare capacity I have in accounts when this happens, if this happens, so no firm orders.
Mike K.
I hate nights like last night. Just when I think I’m getting some of this stuff, nothing makes sense.
It takes some time to get a grip on it and even then it is not easy.
[...] officials changing their view about the Yen. Indeed, that’s what happened, and more. Bank of Japan held an unscheduled policy meeting recently, even if it didn’t accomplish all that much. But this demonstrates just how big of [...]
Totally make sense to me , great analysis!
nice post. thanks.
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