Yesterday I wrote here about how Japanese officials are attempting to jaw-bone the yen lower. Today it looks like its working. As of this writing, we’re looking at a move of almost exactly 1 point, or 100 pips in USD/JPY. Yen weakness is the theme of the day so far, with the yen depreciating 1.12% vs. USD, 1.38% vs. AUD, 1.35% vs. EUR.
Let’ take a look at today’s chart vs. yesterday’s on USD/JPY: (click charts to enlarge)
As you can see from the charts, today’s move in this pair is considered a “gap” up, meaning that there was strong demand to own this pair. This is likely the result of some short covering and unwinding of the carry trade, which has occurred due to the reasons I outlined in yesterday’s article.
This will show us if a new trend is emerging if price doesn’t return to “fill the gap”. I identified around the 89 level as the first layer of resistance yesterday so let’s wait to see if we can get to that level and then what occurs if we get there.
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