In an otherwise dull, or rather directionless, trading on Monday, Yen pairs stood out. They all registered sharp declines, falling 200+ pips in some instances. Many sources claimed that was in search of a safe haven, or even a hedge against rising oil prices. Hard to see how the JPY can possibly be a hedge for the crude, given that Japan is the largest net oil importer. As far as the safe haven argument goes, well, maybe, but we did not have any geopolitical or economic development large enough to suddenly create such need. Most likely, this is simply a technical correction following the strong moves before. After all, currencies have been gaining on the Yen for couple of weeks making huge advances.

I was looking for short-term and admittedly smaller corrections in the Yen pairs in early trading. In case of the AUD-JPY, my objective was only 50 pips. The signal was a bearish reversal candlestick pattern on hourly chart, which turned out to be a harami. It followed a suitably large, but short-lived continuation, exactly what I sought. Needless to say, it captured only a portion of the potential, although that was mitigated by taking more trades.

Since all of the JPY crosses presented virtually the same opportunity, I made few more trades, including this one in the beast. Because the GBP-JPY moves more under most circumstances, my objective was more ambitious. In the end, I settled on 75 pips gain here. I would expect these pairs to consolidate now for some time and then we shall see what is likely to happen next.

Mike K.