Coordinated Intervention Sends USD JPY Sharply Higher

After abreak to nearly 76.00 on Thursday, the USD JPY rallied overnight after theGroup of Seven nations agreed to take steps to curb the Japanese currency’srapid rise. The wave of coordinated intervention by the global financialpowerhouse also known as the G-7 is an attempt to stabilize the Yen and bringit back to more respectable levels following the post-earthquake rally.

After abreak to nearly 76.00 on Thursday, the USD JPY rallied overnight after theGroup of Seven nations agreed to take steps to curb the Japanese currency’srapid rise. The wave of coordinated intervention by the global financialpowerhouse also known as the G-7 is an attempt to stabilize the Yen and bringit back to more respectable levels following the post-earthquake rally.

The rallyapparently started with the Bank of Japanselling the Yen followed by the EuropeanCentral Bank. Later it was learned that the Bank of Englandalso participated in the invention after it released a statement saying itintervened “to give effect to the G-7 finance ministers’ communiqué.” U.S.and Canadian central banks are expected to participate in the intervention whenthe North American markets open later today. This should put additionalpressure on the currency.

Earlierin the week, the BoJ had flooded the market with liquidity, but repatriationfollowing massive global equity market liquidation sent the Yen sharply higher.It is being reported that the BoJ requested the intervention out of fear thecurrency would appreciate so much that it would curtail its export businesswhich is necessary in order to get the economy back on track following the earthquake,tsunami and nuclear meltdown issues. The central bank is taking the pre-emptivestep because it believes that a wave of repatriation especially fromcarry-trade reversals will continue to push the Yen to historical levels.

The moveby the G-7 nations pushed the U.S. Dollar/Japanese Yen back above the formerNovember 2010 bottomat 80.24 and also retraced more than 50% of the current 83.29 to 76.37 mainrange. As the saying goes, intervention rarely works. So after a short-periodof consolidation the Yen is likely to retrace at least half the breakespecially if the situation in Japanworsens.

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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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