Will the Yen Surge? When the FED and BOJ Diverge?

Jan 21

With the potential of the Federal Reserve lower rates and the possibility that the BOJ will increase interest rates, this could be a great trade. The BOJ has kept interest rates in the negatives for quite some time and after years and years, inflation was able to manifest itself and push the BOJ to be one of the last Central Banks of the G7 nations to increase rates. I am thinking with a divergence between the FED and BOJ, price could move lower to the 130 lvl. If the 150 lvl is breached and price is able to hold above it for a significant time (after the BOJ and FED meetings in a few days) , then traders and investors will likely push price above the 152 lvl. The BOJ may attempt to conduct Forex operations, but with the amount it has done so far, it would likely have minimal effects and will likely be forced to raise rates and/or adjust its YCC further. Either way, I think the over trend is going to be to the downside.

Do your own due diligence when placing a trade trade. Manage your risk. You could lose more than you put in. Y'all have some great trading out there.

Feb 25

Note

Price is trading above the 150 lvl and came near the 151 lvl before dropping. The 150 is holding and price may still be able to hit the 152 lvl. April/May timeframe is coming up and this could be the catalyst that either pushes price lower, towards the 145 lvl or causes the BOJ to potentially hit the market with a round of intervention. If the FED does reduce rates and the BOJ raises this, this will cause a massive surge to the downside, which could see a move of around 500 pips. I am thinking a lot of these central banks are waiting to see what the FED will do.

I am still on the side that price will eventually start dropping, and I am building my positions in anticipation of that drop. Since I am going short, I am being hit with negative rollover interest, which I am utilizing various others pairs to push my rollover interest to the positive side.

Have some great trading out there.

Mar 8

Note

The USD NFP came out hire then expected (275k vs 198k) with the previous printing being revised lower. This could push the FED to continue on with its plan to lower rates, sometime in June. There is still a lot of data to be released from now until before the FED meeting. On the other side, the BOJ meets in a couple weeks (March 18/19) and some analysts are thinking that the BOJ could make its move then; increase rates and getting out of the negative territory. With how price is pushing lower, traders are potentially getting into position before that happens. It could also mean that investors and traders that are on the long side are exiting their positions. If the BOJ does lower rates in a couple weeks, I think price will be able to hit the 145 lvl and price might stabilize around the 143. When the FED does push rates lower, this could propel the price to hit the 140 lvl and potentially break it.

Mar 17

Note

Here it comes. The Tuesday BOJ Rate Decision. Will the BOJ increase rates and get out of negative territory? Some say yes and some say no. But even if the BOJ doesn't raise rates come Tuesday, they are projected to raise rates, potentially in the Summer. But rates do push higher at Tuesday meeting, then price might be able to push back to the 147 lvl, but will likely recover because of the FED Rate Decision. If the FED Rate Decision matches expectations that analysts, traders, and investors have about lowering rates 3 times this year, then price will continue to push lower, likely hitting 145.
On the monthly chart, price seems like it is in the process of working on completing the head portion of the head and shoulders pattern. Given what the fundamentals and market sentiment is showing, it is highly likely that price will push lower. Eventually it looks like price might be able to hit the 102 lvl, but that might be years before that happens (and during this time the BOJ might intervene to stop volatile movements such as that).
I am building my position to see if I can push my average as close to 150 lvl as possible (at least above the 145 lvl). If things get a little dicey and price starts pushing above the 150 lvl and staying there, it is also projected that the SNB might start lower rates. So the USD/CHF could be a good pair to use to hedge the USD/JPY in the meantime until price starts pushing back down.

Y'all have some great trading out there and remember to do your own due diligence.

Mar 20

Note

BOJ hiked rates out fo the negative territory, yet the YEN depreciated. Some say the reason is, even though there was a rate hike, the BOJ had a dovish outlook. Additionally, since expectations are split on whether the FED will still to 3 rate hikes this year or stay on hold with current rates, this is causing the Yen to drop. Price has pushed above the 151 lvl and might be able to hit the 151.50 and possibly the 152. But let's say the FED does hold rates longer and the JPY does surge past 152. How far can it surge until the BOJ reacts. Also, since Japan is part of the G7 nations, will the other G7 nations/Central Banks allow for a capital flight out of the Yen to happen? I don't think so. Just like some of the G7 nations helped out Japan during the devastating earthquake and nuclear crisis in 2011, causing the Yen to surge, this could be one of them. Japan is the third largest economy, so if there is stability that threatens Japan which could jeopardize the economy of other nations, this won't be allowed to happen. Now it comes down to when the intervention will take place if price keeps pushing higher and/or price moving higher starts to temper itself, and how long positions on the short side can remain solvent. If you are unable to resist a move to the 160 lvl and remain solvent, this is not a pair to trade as you'll be hit with negative rollover interest as well as floating losses.

Apr 13

Note

Price is pushing higher and higher and might be able to hit the 154 lvl. USD CPI data came out higher then expected this week which pushed traders and investors and analysts to think the FED will hold rates for longer. If price does keep pushing higher and with the BOJ inflation above 2% also, at what price lvl will the BOJ intervene? The BOJ will also likely have to raise rates again if the FED sticks to holding onto rates for longer and/or reduces the amount it will lower rates for the year. There was a lot of news about how the FED might be able to pull off a soft landing, but it is still up in the air if it will happen. Government Spending is increasing along with the debt owned. There isn't enough revenue being generated by the US Government so borrowing has to keep happening. Conflicts in the middle east and in Europe/Asia, and the elections coming up, the FED is between a rock and a hard place. I am thinking, either way they take it, reduce rates, keep rates the same, or even raise them, the JPY will eventually drop because the BOJ will either be able to be at ease if the FED does lower rates or be forced to act because the Yen keeps depreciating.

Jul 26

Note

Finally things are cooking with the JPY. Signals are pointing to the JPY pushing lower and potentially hitting the 130 lvl, possibly by the end of the 1st QTR of 2025. The FED is highly projected to reduce rates in September and potentially 3 times afterwards. The BOJ is looking to raise rates some more, which is keeping the FED and BOJ in diverging mode. Additionally, I am thinking that this works out for the BOJ also because if Donald Trump becomes President in November, Japan likely does not want to be labeled as a currency manipulator. It is on the US monitoring list, but is not designated as a manipulator.

Price has taken a huge tumble so there might be some rallying going on, but it seems like the trend has shifted and price is going to start its descent for the next 6-8 months.