The Bank of Japan and the Yen intervention

On the 14th of September, the Bank of Japan carried out a ‘check’ on currency rates, a move believed to be the first step on the way to a Yen intervention.On Thursday the 22^nd of September, the BoJ intervened in the foreign exchange markets to stem the fall of the Japanese yen.

Bank of Japan keeps ultra-low rates  

Earlier, the BoJ kept rates at -0.1% combined with a ‘dovish’ policy guidance, clearly moving in the opposite direction to other central bank policies. On the other hand, the United States Federal Reverse, the FED, hiked rates from 2.5% to 3.25%, the highest level since 2008.

 This divergence in policy has seen the likes of USDJPY trading to the highest level since 1988.

A look at the fall of the Yen and the rise of the US Dollar

Looking at the YEN single currency chart, we can clearly see an aggressive downward trend from March 2020. A stalling in the Yen selloff was seen last week, but this has done little to deter the USDJPY rally with another boost from Yellen and his crew yesterday.

Figure 1 TradingView JPY Basket

We have witnessed the DXY (USD basket) moving aggressively in the opposite direction since January 2021. There is no clear indication that this upward move is coming to an end.

Figure 2 TradingView DXY USD Basket

What now for the Yen basket?

Will the Yen rally hold? After the initial burst to the upside the YEN buying has stalled. However, if the swing low from 13^th September holds, the single currency chart highlights a possible bullish move over the next few days, and possibly weeks, towards a Fibonacci confluence area. Does this suggest that ‘Buy the Dip’ should now be the strategy for Yen?

Figure 3 TradingView JPY Basket Possible BAT formation

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