One day after the strong Yen move rumors abound on the possibility on intervention. Every half an hour or so, there is an update about what Noda or Kan said, or did not say, who called whom, why there was no meeting but a phone call, etc. It is taking on a shape of circus. More seriously, so far there has not been direct threat of intervention, even if every comment from Japanese officials is interpreted that the are “getting ready”. Perhaps, but so far nothing happened and who knows if anything will.

Some claim that that an intervention would not work. All it would accomplish is to provide speculators with even better levels to buy Yen again. This action could go on for months, requiring real commitment from BoJ.  There are also opinions that the only way to weaken the JPY is to roll out another campaign of quantitative easing, which, with time would sour the Japanese currency for everybody. However, at this stage it is difficult to say if the Bank of Japan has enough tools for such an operation, never mind the stomach. For now everybody keeps guessing and trading goes on.

In the brief update yesterday I mentioned that the trade in NZD-JPY from Opening gaps in AUD  post reached its target. All Japanese Yen pairs were sitting at or near supports and looked ready to break them. Some did it earlier than others and Kiwi-Yen was one of the last. Entry was at 59.65, with 90 pips objective. Price moved about 10 pips lower than that, and has been reversing since. The trade was good, worked as expected, which doesn’t always happen.

One of the Yen crosses that moved earlier was the beast, GBP-JPY. Here entry was at 131.90, targeting 130.30, or 160 pips. This pair fell even lower, making a low at 128.80, after this snapshot was taken. Since then all these pairs have been recovering, so right there are no plans to go short again. Charts must form bearish reversal patterns on either hourly or 4 H charts. Will see what happens on Thursday and decide the course of action.

Meanwhile, the EUR-CHF made an all time low, dipping under 1.3000. The daily candlestick for Wednesday turned out to be a doji, a possible reversal pattern. On top of this, the price and the MACD form a divergence. While the divergences to not mean an all out trend reversal, they increase a probability for a substantial price correction. I bought it at 1.3031, with a hard target of 1.3330, risking about 90 pips. We shall see what happens…

Mike K.