Japanese Yen PLUNGES… How to play the move

by Joe Oliver, Forex Trading-Pips

The Yen continued to weaken Monday following BOJ monetary policy committee meeting last week.

Last week’s announcement Bank of Japan Governor Haruhiko Kuroda will at a minimum double the size of the Bank’s monetary base, purchasing forty year Japanese Government Bonds ETFs and equities is putting significant pressure on the Yen…

Is 110 Possible in USD/JPY?

Over the past 48 hours, USD/JPY appreciated more than 5% and the last time we saw a move this large was in November 2011 when the BoJ intervened in its currency. When it comes to USD/JPY it is important to realize that trends in the pair can last for a very long time and extend further than what most would imagine. Between 2007 and 2011, the currency pair dropped nearly 40%. There were certainly recoveries along the way but they were brief and shallow. Before that between 2005 and 2007, USD/JPY rose 20% and a similar move was seen between 2002 and 2005. Over the past year, USD/JPY has already appreciated nearly 28%, leading many investors to wonder how high it can rise. Considering that the Bank of Japan has just begun easing, there’s a lot more room to the upside. Its 10 year average is 100 and at minimum, we expect USD/JPY to rise to this level but 110 is also possible though 104.50/105 is a more realistic short term target.

Basically what the Bank of Japan has done is officially eliminate any reason to buy yen over the next 2 years. Their commitment to bold easing means they will do everything in their power to drive down yields, leading to a more aggressive shift out of Japanese bonds by domestic investors. They will look abroad for higher yields and they will do it on an unhedged basis as the BoJ’s policies should lead to further weakness in the Japanese Yen. In other words, the central bank has effectively given Japanese investors a reason to go global. Their “Quantitative and Qualitative” easing is the central bank’s boldest monetary policy program in recent history and as we have seen in today’s reaction to the U.S. non-farm payrolls report, it super cedes the ebbs and tides of the U.S. economy.

…More at Is 110 Possible in USD/JPY?

One of the best ways to profit from ‘fat tail’ moves in the Forex markets is through the use of Inside Bar breakouts. Inside bars allow positions to be leveraged up in the direction of the underlying trend with minimum possible levels of risk exposure.