Japanese Yen

I am once again intensely observing the currency markets. My blog, two days ago (8/9/2011), was about the high probability of intervention by the SNB (Swiss central bank) in the currency markets and possible appreciation of USD and EURO against the CHF (Swiss franc).That seems to be playing out today. After a brief period of "panic-driven" slaughter of all those who were SHORT against this safe haven currency (I was short too!), right after the FED rate decision (at 2:15 PM on Tuesday), during which the CHF made a historic run against the EUR to 1.00889 and I think close to 0.70 against the USD, SNB stepped in, on Wednesday, as I predicted, and has since then released several statements about how it is going to stem the appreciation of CHF in order to keep its export sector competitive. And, today, as I write here, the CHF is up more than 800 pips from its recent lows and 400 pips from the recommendation I made. News about SNB contemplating pegging the CHF to EURO is driving the current EUR and USD rally agaimst CHF.

Today, I am looking at USD/JPY pair. JPY is below 77 and that's not sitting down well with the major exporters in Japan. Just recently, at this level, BOJ had intervened, and for a short period of time JPY did depreciate; however, that was short-lived. The global economic slowdown and the European debt issues took center stage and since then JPY has rallied again. There is definitely lot of pressure on BOJ to do something about the the strength of JPY against the USD. So, I think, there will be some sort of action by the BOJ to devalue the currency.

So, here is my trade: Go LONG the USD/JPY right away; right now, the pair is at 76.60 - 76.80 area. Put a STOP LOSS at 75.50 and you could stay on this trade and take profits at 80.0.

This has a high probability of success. The reason I say that is, the safe haven JPY has not further rallied beyond 76 even under these extremely stressfull global market conditions and despite US debt downgrade by the S&P. That shows that the traders who are LONG on JPY against the USD are not inclined to add to their existing positions and any BOJ intervention will precipitate a "fast and furious" unwind of this crowded trade.

Good luck!