USD JPY Traders Battling Investors for Direction

Although some traders feel theJapanese Yen may be overextended to the upside, the currency is tradingslightly better ahead of the start of the U.S. session. At this time thereseems to be a tug of war developing between traders and investors.

Although some traders feel theJapanese Yen may be overextended to the upside, the currency is tradingslightly better ahead of the start of the U.S. session. At this time thereseems to be a tug of war developing between traders and investors.

Investors believe in the short sideof the U.S. Dollar/Japanese Yen despite current relatively cheap prices nearthe psychological 80.00 area. Theinvestors are being driven by the thought that Japan will be a net recipient ofcapital over the next few months. This includes capital from insurance claimsand the repatriation of funds from Japanese firms.

Traders on the other hand are tryingto deal with excessive volatility the best way that they can. They know thebias is to the downside because of the repatriation of funds; however, safehaven inflows as well as central bank interjections have flooded the marketwith Yen in a very short period of time. This excessive liquidity is helping tokeep a lid on the Yen at this time. Once this cash gets distributed and put towork, then both traders and investors should see a sharp break in the USD JPY.

Beside the interjection of huge sumsof money by the Bankof Japan, the economy is still suffering because of output disruptions andenergy shortages. A large amount of the population is still without the basicneeds of food, shelter and clothing. While scientists and technicians battlethe problems at the nuclear plants, the country has come to a standstill. Thisis leading to the obvious forecast for a recession.

While the Japanese Yen has shown abias to the upside, the commodity-linked Australian Dollar, New Zealand Dollar,and Canadian Dollar have been hit hard as investors have been shedding risk andturning toward cash or the U.S. Dollar during the Japanese crisis. Investorsare expecting central banks to stand pat and leave their interest rates low forat least 1 or 2 more cycles in an effort to help the Japanese economy gets itsfooting and begin its recovery. Although stocks and gold may have a technicalbounce to the upside today due to oversold conditions, expectations are fortraders to sell retracements until this potential global economic disasterbegins to right itself. In the meantime, watch how the market behaves once theU.S. Dollar/Japanese Yen clears the 80.24 hurdle.

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James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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