Japanese Yen Shorts are Playing with Fire

USDJPY continues to squeeze higher and is testing the 150 level.

After recent comments from the BOJ governor, it is probably getting close to a significant intervention from the central bank. 

USDJPY – Daily Chart

usdjpy daily chart

The upward trendline is at the current level from a July high; this could be where the yen starts to recover. The BOJ Governor Kuroda said recently that the move was “one-sided” and harmful to the economy. The BOJ has intervened twice and may go big on the next one to send traders reeling. 

Inflation is due for the Japanese economy ahead of the Asian session. It will also give traders something to think about. The BOJ may even use a higher number to discuss rate hikes and send lower yen. 

The situation is getting more challenging for the Bank of Japan after it conducted 250 billion Yen (US$1.67BN) in emergency bond-buying operations on Thursday. 

“Upward pressure on yields is so strong that the BOJ’s purchase of the bonds with that amount won’t stop yields from rising,” said Masayuki Koguchi at Mitsubishi UFJ Kokusai Asset Management. 

“Demand for bonds is weak as investors’ portfolios were hurt from rising yields, so they are not motivated to buy bonds. The market is in a vicious circle.” 

The USDJPY is surging ahead of a critical technical uptrend line, and it would not be surprising to see an intervention from the BoE in the coming days.

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