The Bank of Japan made a ¥10 trillion splash in the markets to prevent speculators from driving the value of the Japanese currency higher. Most likely the BoJ was forced to act following yesterday’s quasi-quantitative easing by the SNB to weaken the CHF.
The Asian forex trading session was more volatile than normal with the yen soaring as high as 80.22 from 78.30 at 02:00 GMT when the selling began. In addition to the intervention in the forex trading markets the BoJ also committed to increasing its asset purchase fund and additional fixed rate loans. Both of these programs will be worth ¥5 trillion each.
At first glance the BoJ looks to have succeeded in weakening the yen. Early gains are impressive with the major pairs triggering stops and inflicting pain on both hedge funds and retail forex traders that have been long the JPY. To keep the pressure on those that seek the JPY as a safe-haven currency the BoJ has been selling yen intermittently throughout the day. While not exposing the entirety of the intervention program the BoJ will keep the markets on their toes with the chance the BoJ could begin selling the JPY again to keep speculators at bay.
The technicals show a bleaker picture for the BoJ, particularly in the EUR/JPY which rose as high as 114.16, a level that has significant technical implications. This price close to the pair’s 200-day moving average (113.91), the bottom line of a previous bearish flag pattern stemming from the mid-July low (114.05,) and the 38% Fibonacci retracement (114.25) from the April high to this week’s low. The falling trend line from the April and July highs will likely find willing JPY buyers at the 115.50 level if the pair manages to move higher. To the downside the EUR/JPY may find support at 112.20.
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