The Japanese yen is easily the worst-performing major currency on Thursday (5/2/09) after for weeks the Yen has remained in a tight range just above 87.00. A verbal intervention by the Bank of Japan was preventing the USD JPY from breaking but the declining stock market was preventing a rally. Yen fall rapidly to one month low against the Dollar.
The yen began its fall shortly after the North American equity open as stocks showing sign of moving upward. Further pressure came from speculation the Japanese government plans to waive taxes on profits for Japanese companies that repatriate funds. The Japanese fiscal year ends in March and companies generally bring home funds ahead of that deadline. Market watchers believe companies will delay that process until the tax laws change. The waiting will lower demand for the currency in the short term.
It was rumored that a large US bank bought a large USD put spread which resulted in a net delta to buy many substantial amount of USD. This, when combined with the heavy stop-loss buying above 91.0 and 91.50, had the effect of driving USD/JPY almost 300 pips higher on the day.
Technically, USDJPY up-moved was supported by the lag indicators and the three moving averages. The first clear sign of the bullish moved was the breaching of the 90.00 resistance level at 15:30 GMT. It get into a slight resistance at 91.00 before touching the 93.00 level at 17:00 GMT. By Thursday, it closed at 92.00 level. (see the 30 min chart below).
Friday Asian session:
Normally in Asia we see a bout of profit taking in early trade, this suggest that USDJPY which has a big move yesterday will see some early selling. Early morning I am looking for a short position especially looking for USDJPY to fall below 91.00 level.
Refer 1 min chart below.
Thirty minutes after Japanese session open, the 6 ema crossover the 12 ema from above and Stealth Buy&Sell indicated a short sell. About 20 minutes later at 00:53 GMT both ema’s crossover the 50 sma and Stealth Buy&Sell and Stealth LCD is in sync with red(sell) color. Profit target at daily pivot point at 90.85.
By US session, USDJPY has broken today’s High at 91.50. Market folklore has it that the first move of the week in Asia is always wrong. If this is the case, the USDJPY which has been slowly moving downward for the first two days of the week is expected to showed strength by Thursday and Friday. Therefore I am expecting USDJPY after breaking today’s high to test yesterday high of 92.23. The 1 min TF trade of mine is as follows.
At 13:16 GMT there are 4 buy signals that I follow i.e the moving average crossover, lag indicators and the Stealth filters. The bear trap at13:30 GMT trigger my stop loss at 10 pips. However the next candle indicated that the buy signal is still intact so I entered again. My profit target is for 30 pips.
