I entered a short USDJPY position on Friday evening, this is why
It seems stupid to trade against the dollar right now, huh? Well, I think there is potentially a good early shorting opportunity against the Yen. This is why...
The Fundamental View
1. The BOJ intervened in the Forex markets on Thursday 22nd September. This is just the start. I understand that the BOJ are doing this by themselves (without the support of the Fed or other economic powers) but they definitely have some Yen buying power - what a move they caused on Thursday! The BOJ could definitely cause at least one or two more moves like this, and I really wouldn't mind being on the right direction of those moves. I understand that the BOJ's buying power may not outweigh the current USD buying power, but this leads me to my second point...
2. Dollar is king right now. No one would disagree with that. After this weeks moves though - and I guess the moves from the last couple of months - I think the dollar buying could finally lose some steam. I am not suggesting that the selling is over, but the bulk of selling may becoming to an end, which could mean the JPY could have the upper hand when it comes to buying power. The markets seem to have finally accepted the reality of recession and high inflation, which is currently being priced in - hopefully "fully" priced in within the coming days. Even if dollar pairs bounce for a few days, this could give the JPY the weight it needs to bring USDJPY down.
3. For those willing to trade against the dollar right now, or trade against the dollar in coming days or weeks, which non-Dollar currency are people going to buy? The pound?! No. The Euro?! No. Maybe the Australian Dollar but the Yen - who's central bank is actively intervening to strengthen it - seems like the obvious choice to me.
The Technical View
1. On the lower time-frames, price is around key FIB levels based on Thursday's bearish move.
2. On the 1 hour, price is also testing a clear horizontal level
3. On the 4 hour, price is also around a previous diagonal support area as resistance
4. On the weekly, price is historically far from the weekly moving averages, suggesting some downside/correction/retrace may be due
Obviously, price could continue to move higher. If it does, I will continue look for technical reasons to sell based on my fundamental beliefs.
The Fundamental View
1. The BOJ intervened in the Forex markets on Thursday 22nd September. This is just the start. I understand that the BOJ are doing this by themselves (without the support of the Fed or other economic powers) but they definitely have some Yen buying power - what a move they caused on Thursday! The BOJ could definitely cause at least one or two more moves like this, and I really wouldn't mind being on the right direction of those moves. I understand that the BOJ's buying power may not outweigh the current USD buying power, but this leads me to my second point...
2. Dollar is king right now. No one would disagree with that. After this weeks moves though - and I guess the moves from the last couple of months - I think the dollar buying could finally lose some steam. I am not suggesting that the selling is over, but the bulk of selling may becoming to an end, which could mean the JPY could have the upper hand when it comes to buying power. The markets seem to have finally accepted the reality of recession and high inflation, which is currently being priced in - hopefully "fully" priced in within the coming days. Even if dollar pairs bounce for a few days, this could give the JPY the weight it needs to bring USDJPY down.
3. For those willing to trade against the dollar right now, or trade against the dollar in coming days or weeks, which non-Dollar currency are people going to buy? The pound?! No. The Euro?! No. Maybe the Australian Dollar but the Yen - who's central bank is actively intervening to strengthen it - seems like the obvious choice to me.
The Technical View
1. On the lower time-frames, price is around key FIB levels based on Thursday's bearish move.
2. On the 1 hour, price is also testing a clear horizontal level
3. On the 4 hour, price is also around a previous diagonal support area as resistance
4. On the weekly, price is historically far from the weekly moving averages, suggesting some downside/correction/retrace may be due
Obviously, price could continue to move higher. If it does, I will continue look for technical reasons to sell based on my fundamental beliefs.