G20 gives the green light to Yen traders…

by Joe Oliver, Forex Trading-Pips

The Japanese yen resumed its decline early Monday after G20 gave the ‘green light’ for further debasement of the Japanese currency.

From G20 post-meeting communique:

  • ‘Japan’s recent policy actions are intended to stop deflation and support domestic demand’
  • Japan should define a credible medium term fiscal plan.

From Mr Aso – Japan Finance Minister:

  • “We were expecting to hear a lot of different views about our policies my position is that the Yen’s decline may have resulted from our policies but the aim of our policies is to escape deflation. Yen weakness is a byproduct”. 

David Rodriguez of Daily FX discusses the implications for the Japanese yen going forwards…

The Japanese Yen finally showed signs of life as it rallied strongly against the US Dollar and other major counterparts, but lack of action from a highly-anticipated G20 meeting gave traders the “green light” to continue selling into JPY weakness.

 

G20_Gives_Traders_All-Clear_to_Sell_Yen_-_Will_Bank_of_Japan_Comply__body_Picture_1.png, G20 Gives Traders All-Clear to Sell Yen - Will Bank of Japan Comply?

Price action across broader FX markets was especially indecisive in Yen pairs, but an important week of Japanese economic event risk gives hope we might see more definitive swings ahead. The JPY trades within rounding error of the psychologically critical ¥100 mark, and we get the sense that this might be the week it actually takes out the key threshold. All eyes turn to the Bank of Japan’s key interest rate decision on Thursday night/Friday morning, while the prior day’s Consumer Price Index inflation data could likewise elicit reactions from JPY pairs.

It is difficult to understate the significance of the Bank of Japan’s hyper-aggressive Quantitative Easing measures to date, but the dramatic Japanese Yen sell-off suggeststraders will want to see a firm commitment to continued easing if it proves ineffective. Indeed, the BoJ trounced market expectations for QE in its March meeting and sent the domestic currency into a tailspin. But if their bombastic actions did anything, it set the stage for similarly lofty expectations for future rate decisions.

Keep an eye on JPY pairs leading into the BoJ rate announcement—especially if the USDJPY rallies further and trades to fresh multi-year highs ahead of the central bank meeting. Recent CFTC Commitment of Traders data shows that large speculators near their most net-short the Japanese Yen (long USDJPY) since it traded near ¥120 six years ago….More at G20 Gives Traders All-Clear to Sell Yen – Will Bank of Japan Comply?

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