In spite of repeated threats of intervention, the Bank of Japan is still only talking about it. Perhaps they are concerned that any new effort would only result in failure just like the most recent intervention. A lot market observers expected Japanese financial authorities to do something after the Swiss National Bank set the intervention tone earlier this week. Because this particular action was different from a typical intervention, chances are that BoJ is simply watching to see in these steps will have staying power.

There are other considerations, too. It would be more difficult for Japan to set ceiling/floor targets for Yen because it trades at 3-4 times the volume of Swiss Franc. For this tool be effective in case of economy of that size, authorities would have to impose capital restrictions or even  abandon its monetary policy, something that might not practical here. Instead, Japan appears to be taking another path by arranging for a coordinated action with other central banks, similar to what happened in March.

Japan was supposed to bring this matter up during the current G-7 meeting in Marseille. Details are sketchy but Japan said it had received G7 blessing for unilateral foreign exchange action. However, other delegates said the issue had not really even been discussed in depth by the meeting, and the statement had simply used the wording of previous statements. In the end, as it is often the case with the BoJ, there is more talk than action and markets are left guessing….

Intervention or not, I have a long trade in the USD-JPY based solely on charts, as discussed in the last post. My entry was at 77.77 seeking at least 100 pips. Because this pair is not moving a lot now, the ATR is low on all time frames, I do not realistically expect a speedy resolution. This trade was initiated on Friday and immediately dropped into red on increased volatility, but is recovering now. We shall see what happens after the weekend.

On Fridays I often focus on trading at the start London session, and yesterday was no exception. The GBP-USD created a good breakout set up, with nicely defined entries for either side of the market. While it took a long time for a move to come, almost 3 hours, eventually the price full sharply. Result was a quick trade on the short side, which brought 40 pips in minutes. Real movements did not come till later in the day and I will discuss them tomorrow when looking for clues for opening trades. Have a great weekend!

Mike K.