- The USD/JPY has gotten hammered, as the Japanese yen got a major boost from its central bank overnight.
- The Bank of Japan has announced that it is willing to let the 10-year note increased to 50 basis points, which is a stark departure from what we had seen previously.
- Because of this, the market is very likely to continue favoring the Japanese yen in the meantime, and now that we are below the 200-Day EMA, it really sets things on fire.
That being said, longer-term we are going to have to see how this plays out because there is the reality that the interest rate differential between the 2 economies is still wide enough to drive a truck through, and right now we have a lot of position squaring right now. Because of this, yet to keep in mind that the interest rate situation and monetary policy situation still favors the United States, so there will almost certainly be a bit of a bounce. True, I wish I would’ve caught this move myself, but it is what it is. It happens in the middle of the night for me, and I just can’t be there for it. This is the difficult part about trading, recognizing one pair has gone too far to start chasing.
Look at Rallies as Selling Opportunities
For example, I’m looking at the AUD/JPY pair at the moment, in my other monitor. It’s down 5%. This is a massive move in one day, and therefore you can’t be bothered to chase it. For that matter, the USD/JPY pair is down 4.5%, and therefore it’s overdone. Simply “chasing the trade” at this point is an excellent way to start losing money, especially as the volume is probably thin.
Speaking of that, it could be part of the culprit for the size of the move. Regardless, it looks like we are going to continue to correct and could find ourselves looking at the ¥125 level before we know it. Rallies at this point will probably be selling opportunities, at least until we can get a daily close above that 200 Day EMA again. Ultimately, the markets are breaking at the moment, so therefore you need to be very cautious with putting too much money to work under the best of circumstances. Now that we have the Bank of Japan out there shaking things up, the markets just became a lot more dangerous.
Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers to choose from.