Currency interventions were able to slow down the growth of USDJPY, but did not stop it

14 October 2022 331
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The USDJPY pair continues to work its way up. Yesterday the quotes surpassed the maximum mark of 1998 of 147.65. Apparently, further growth targets are shifting to the levels of 32 years ago: since in 1990 USDJPY was above the 160 mark. Will this ambitious goal be achieved as well?


It is highly likely that a new record could have been set at the end of September, when the dollar against the yen exceeded the level of 145. Therefore, the Bank of Japan officials carried out the first foreign exchange intervention since 1998. Spending almost 2.8 trillion. yen (more than 19.3 billion dollars), the Japanese regulator managed to slightly cool the ardor of traders betting against the yen. However, as soon as the Japanese officials left the currency market alone, it immediately continued the interrupted movement of USDJPY to new heights.


The run-up of the dollar is clearly not over yet. Yesterday's inflation statistics confirm that despite the decline in overall price growth from 8.3% to 8.2%, the core index (not taking into account fuel and food prices) exceeded the March maximum and equaled 6.6%. Now the probability of the 4th consecutive rise in the key rate by 0.75% at the Fed meeting on November 2 is quite a bit short of 100%. In such a situation, how is the Bank of Japan with its negative rate of -0.1% going to keep the yen from falling?


Obviously, new interventions on the sale of dollars and purchase of yen are coming. But when exactly will these interventions happen? If the previous BOJ intervention was at 145, it would be logical to see another intervention at the next bull's eye level, at 150.


At the same time, to increase reliability, you can wait for the USDJPY to roll back to the level of 145. After that, positions with the expectation of a resumption of growth can be opened.


Following options for a trading strategy may be offered:


1) Buy USDJPY at the current price. Take profit - 149.5. Stop loss - 146.5.


2) Buy USDJPY when it falls to the level of 145. Take profit 1 - 147.5. Take profit 2 - 149.5. Stop loss - 143.5.


Also, traders can use Trailing stop instead of a fixed Stop loss at their discretion.

This content is for informational purposes only and is not intended to be investing advice.

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