Wednesday, September 8, 2010

JPY Trade: Reloaded

Morpheus: I imagine that right now, you're feeling a bit like Alice. Hmm? Tumbling down the rabbit hole?
Neo: You could say that.

--The Matrix

I do feel a bit like Alice. TheUSD/JPY pair rallied in London and New York trading after selling off in Asian trading. The FX rate established a new 15-year low during the session, trading down to levels of 83.35. I took profits on the pop, during morning U.S. trading, around 84.00 levels. Prices recovered when Finance Minister Yoshihiko Noda 'said he is prepared to take “bold” steps on currencies if necessary.' However, I am contemplating a long position in the Yen until 82.50. I watched the tape for the majority of the past 48 hours (fun times) to get a feel for directionality. I am confident prices will move lower.

Part of me wants to believe all of this intervention talk, led by PM candidate Ichiro Ozawa, will lead to more 'normalized' price levels (i.e. 88-90). However, my sinister half believes this was a short-covering rally today. In the ten minutes preceding the Beige Book announcement the pair came to an abrupt slow down in trading. Once the words 'decelerated growth' were uttered on CNBC prices gapped down to 83.79-81. During President Obama's 'Economic Speech', shortly thereafter, prices jumped back up to 83.92-95 levels. Hence, U.S. economic speak was not a significant momentum catalyst, net of direction, for the pair.

JPY 2day chart- 5 minute bars

Will the tape top out at 84.125 resistance levels? What has changed over the past 48 hours to stunt the momentum of a six month downtrend in the USD/JPY pair? Clearly, many uncertainties and rapid-fire change engulf trading. Thus, I look to a glut of international economic data releases that may potentially impact price directionality:

19:50- JPY BSI Large Manufacturing Conditions
01:00- JPY Household Confidence
02:00- JPY Machine Tool Orders
02:00- German CPI (MoM)
04:30- ECB Monthly Report
07:00- BoE Interest Rate Decision
08:30- U.S. Trade Balance
08:30- U.S. Initial Jobless Claims
19:50- JPY GDP(QoQ)
19:50 BoJ Monetary Policy Meeting Minutes

If I have learned one thing in my short few years of trading it is, 'don't trade against the tape.' I will leave you with some wise words from Adam Smith:

"The chance of gain by every man is more or less overvalued, and the chance of loss is by most men undervalued and by scarce any man who is in tolerable health and spirits valued more than it is worth."

Patrick M. Ambrus
Twitter: AnalyzeCapital

USD/JPY = 93.9150 as of 19:37 EST. The 'Matrix' theme for this post was inspired by a fellow trader of mine, Sauros, please view his blog: Yoshihiko Noda quote was borrowed from

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