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This currency paid has been within a long-term upwards track. However, financial institutions and large players who find themselves taking opposing positions and are trying to merely pursue the bullish trend often find that dangers and expensive losses lurk. The USD/JPY trend is publicly being confronted by the Bank of Japan – and sometimes the U.S Treasury/Fed – and those who want to pursue what appears to be a consistently rising tide, must also acknowledge the tide reverses quickly. Retail traders who want to pursue the USD/JPY cannot be blamed, there are profits to be made, but substantial losses can occur too.
USD/JPY’s Uptrend Remains Vulnerable to Sudden Reversals
Technical traders of the USD/JPY can point to a long line of charts to say the currency pair remains locked within an upwards draft. However, those same technical charts – including near-term – also clearly show that spikes downwards occur. The desire to seek momentum in the USD/JPY remains strong and can be described as tantalizing.
Yet, experienced speculators know that what feels like a comfortable march upwards can be struck by a sudden punch downwards. The Bank of Japan is caught within a monetary policy that has many financial institutions outwardly betting against the JPY, thus the BoJ has steadily intervened and crushed long positions. The ability of the Bank of Japan to intervene remains a real threat for large and small traders tempted to buy the USD/JPY.
Intervention Warnings Complicate USD/JPY’s Renewed Advance
As of this writing the USD/JPY is near the 158.350 realm and has been showing a track upwards. The currency pair remains fast and has been climbing again over the past couple of weeks – but has also seen momentary strikes lower. Betting on the USD/JPY to move higher at the current elevations is a wager that makes sense.
But it is also a gamble, because if financial institutions are threatened by the BoJ via rhetoric that an intervention could occur, this sometimes proves enough to cause reversals lower. Yes, the USD/JPY has been higher and then has faced loud interventions. Two questions and points come to mind: where would the USD/JPY be if there had been no interventions over the past year? And how should traders attack the USD/JPY if they remain skeptical about fundamental policies that the Bank of Japan is having a difficult time fixing – particularly when interventions to kill off buying momentum is a real piece of the trading landscape.
Abrupt Price Moves Can Undermine Planned Exits
Without the influence of the Bank of Japan interventions the currency pair would likely be closer to 170.00 at this juncture, perhaps higher. However, that really cannot be worked into the thinking of traders accept to know the policy of the BoJ is not held in high regard in the mindsets of many financial institutions.
Thus, retail traders need to understand if they are wagering on the USD/JPY, that the bets should always be on the lookout for sudden problems to emerge and have take profit orders working to cash out winning bets. If a trader can use a trailing stop and simply have their wager eliminated effectively with a profit remaining that is a good option. However, sometimes interventions can cause notorious spikes downwards which shoot past stop loss orders leaving traders at the mercy of their brokers.
USD/JPY Price Chart – Double Top at 158.00
Rising USD/JPY Tests Confidence in the Trend
You cannot blindly bet on the upside of the USD/JPY. The BoJ has proven it can and will hurt the largest of players in the currency pair if they believe too much speculation exists. The Bank of Japan however remains caught in a tough problem. Clearly the government of Japan favors a somewhat weaker JPY, but at the same time doesn’t want the currency to become too devalued. The current USD centric strength in the broad market is problematic too for the USD/JPY right now and not making things easy on policy makers in Japan, nor the U.S Treasury. Yet, looking for upside in the USD/JPY remains the logical bet. However, conservative traders may want to wait for downturns and then look to ignite upside bets.
Following Momentum and Avoiding Sudden Violent Shifts
The USD/JPY is approaching dangerous elevations once again. Again – being the most important word. We have seen this currency pair theatre before. Buying the USD/JPY certainly remains the flavor of the day. The problem for speculators is knowing when it is safe to step into the speculative spotlight and follow momentum correctly, without getting destroyed by a sudden shift of sentiment caused by the BoJ.
USD/JPY: Levels to Watch
Around the article’s quoted price of 158.350, the immediate focus is whether that support area holds and how the pair behaves near resistance at 158.450. Sustained trading above resistance would put 158.850 into focus; a loss of support would shift attention toward 157.950.
These are reference points rather than promised destinations. The unresolved issue is whether moves beyond this narrow range attract sustained participation or quickly reverse, particularly if intervention concerns return to the foreground.
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