Things have been awfully quiet for Japan and the Japanese Yen (JPY) of late, but with the risk aversion in the market the Yen has been strengthening. This makes me nervous. The Yen is at 15-year highs vs. Euro, and has been moving in the same direction vs. USD.
Recently, the US admonished Japan for their currency interventions in the past, but at this point Japan may have no choice. With an export-led economy and massive deficits, the Japanese rely on a weaker currency to make their exports more attractive to the market. But with recent strength, this is harder for to accomplish, especially in an uncertain global economy.
In the past, the BOJ has used the strength of the USD/JPY pair as its benchmark for when to intervene as both currencies are seen as safe-havens. And though the Yen is not as strong against USD as it was the last time they intervened, it is pretty close.
As you can see from this 4-hour chart, 76.60 has been the low since the last time thye intervened. Will the BOJ use this level as the new “line in the sand”? With major risk coming form the Euro zone, this might very well be the case.
So I am looking to get long the USD/JPY pair with a stop just below the 76.50 area for a low risk entry.