Bank of Japan (BOJ) intervened in the currency markets today and caused a big spike up from 82.88 to 85.78. That is nearly a 300 pips to the upside! Did you manage to catch any of that? Well, for me, I took some from a long GBP/JPY trade I took today. A 50 pips gain and I am happy about that.
Tadao Noda, a BOJ board member said that the central bank will use fund to provide liquidity in the currency markets. It has been said that Japan spent a huge amount of yen today when it intervened in the currency markets. This is the first time the central bank had intervened since 2004 according to an insider that gave the information on condition of anonymity. (A tactic often used I guessed by most institutions to avoid being probed further.)
We should not be surprised by this move by the BOJ. It has a history of putting its hand in the currency markets in order to so called protect its economy that it has been trying to prop up for years. On record, there has never been an intervention that has been successful in the longer term. So, there will be traders looking to take a short position for a good short term trade. We could also expect the pair to test its lows again before moving up and into a range for the foreseeable future.
With the dollar yen pair no longer moving in a single direction, I guess we might just have to look at other pairs.
Joyous trading to everyone!
~ Ardy Ismail
Singapore Forex Blog