USD/JPY: Sword Fight Risks Cutting Speculators to Shreds

The USD/JPY has traded upwards in the past day, and the incremental climb higher in the currency pair is likely causing nervousness within the Bank of Japan again.

Last week’s intervention by the Bank of Japan to ‘protect’ the Japanese Yen worked wonders. The USD/JPY currency pair sank to a low of nearly 140.300 on the 22nd of September and the BoJ likely was able to breathe easy. However, the past three days of Forex have seen an incremental climb developing within the USD/JPY again and as of the writing it is trading near the 144.300 ratio. As the Bank of Japan tries to fight against the bullish trend of the USD/JPY, it has become obvious that some financial institutions remain skeptical about the BoJ’s ability to protect the Japanese Yen without interest rate hikes.

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Dangerous Trading Conditions are Obvious in the USD/JPY

The USD/JPY currency pair is absolutely within shouting distance of its higher price range again. Speculators who remain bullish and had the bravery to actually buy the USD/JPY currency pair after the BoJ intervened may have been able to make sizeable profits. However, speculators who were ‘long’ before the Bank of Japan intervened may have been cut to pieces as the market ripped downwards last week.

The willingness of the Bank of Japan to intervene in order to try and protect the Japanese Yen remains a danger. While it might be tempting to try and ride the USD/JPY higher and assault nearby resistance with the belief it can be penetrated higher, traders need to be cautious that they are protected with stop loss orders in case the BoJ once again acts.

Another factor for traders is that stop losses can be blown apart in fast market conditions, meaning that the intending protection may not be honored if a dagger downwards violently occurs. This battle in the USD/JPY is being played by large financial institutions that are betting against the BoJ and have the money and time to undertake the fight.

Nervous and Fragile Global Conditions is an Opportunity but also a Warning

  • The USD/JPY remains elevated and if support near the 144.000 is sustained, this could cause speculators to believe another leg up can be pursued.
  • Bullish traders with a target for higher moves should use take profit orders to cash in profits if they materialize to guard against violent reversals in the USD/JPY.

The USD/JPY is tantalizing because it is flirting with highs that have been hit consistently before and speculators may want to target the resistance ratios for short term wagers. However, the shadow of the Bank of Japan lurks and another intervention is possible. But for traders who have solid risk taking tactics and can bet conservatively, pursuing slightly higher ground in the USD/JPY may be quite tempting while global markets remain extremely nervous.

USD/JPY Short Term Outlook:

Current Resistance: 144.670

Current Support: 144.000

High Target: 145.190

Low Target: 143.550

USDJPY27092022 (1)

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Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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