USDJPY obliged by tagging our target three days later, then reversing as expected. At the time, there seemed to be considerable downside potential. A client who actively trades the USDJPY asked for downside targets, and I posted this chart on the 6th.
Then, all of a sudden, it didn’t. Nothing was happening. USDJPY headed in the general direction of target “e”, but reversed on the 12th at a point that created a new, rising channel. For another week, USDJPY angled higher, buoyed by suggestions that the BoJ would increase its easing.
I didn’t’ believe the suggestions, as the BoJ has painted itself into a corner with respect to NIRP and currency devaluation. As the latest policy meeting approached, I added some downside targets that equated those original targets “e” and “f.”
The announcement was as obtuse and delusory as anything Draghi might have dreamt up. But, cutting through the BS, there would be no additional easing — only an attempt to steepen the yield curve. As it loves to do, the BoJ forced USDJPY higher in a self-congratulatory spasm, breaking out of the extension of its original falling channel.
Holding short during that 30-minute, 1.77 spike would have required nerves of steel. And, that was the point, right? Stopping out those of us who saw the downside case as being obvious?
By the time the dust settled, those price levels were as accurate as could be — even if it took a little longer than expected. Total move, from 102.47 up to 104.24 and down to 100.09: 5.92. A very nice 3-week return. And, though it took more than a little patience, it was worth every sleepless night.
With the ECB, BoJ and FOMC all having trotted out their brilliant plans for a recovery (what’s the hurry…it’s only been 9 years?) we’ll take a look at what to expect next.
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