Simple Forex System Trading

We know the Japanese authorities repeatedly warn the markets that they will intervene because they don’t want yen to strengthen any further.  Markets have twice set record lows within the few days.  What is BOJ waiting for?  Where is their bottom line?

“Its not enough for the BOJ to only expand its asset-buying program by Y5 trillion or lengthen the duration of JGBs it buys in order to surprise the market because these options have already been reported,” he says. He adds: “if Japan were to intervene now, their target could be three big figures, meaning a boost to around Y79.00.”

 

“Japanese companies continue to worry about the strength of the yen against the dollar. In order to stop local firms relocating factories and jobs away from Japan to competitive locations like the US, the authorities are likely to act to prevent any major downside moves in USDJPY from current levels.” Furthermore, even with the sharp recent volatility in EURJPY, policymakers remain focused on USDJPY: “This is because the low levels of the dollar make America rather than Europe a more attractive destination for Japanese companies to relocate production to” they observe. As a result, the UBS team concludes: “We dont think investors should try to chase USDJPY lower through 75 given the risk of renewed intervention by the authorities.”

via Forex Flash: Do not chase USDJPY lower through 75 – UBS.

Just as Japan’s supply chains were poised to return to normal after the March 11 disaster, the surging yen began pummeling a Japanese economy already taking a beating from the global financial unrest.  Mitsubishi Motors Corp, which was looking to sharply increase production, suddenly halved its plan to hire about 800 temporary workers by the end of September.  In bidding competition for Southeast Asia’s first 1-megawatt thermal power plant, Mitsubishi Heavy Industries Ltd. lost to Alstom SA of France despite expectations that it would win the order.

Japanese companies are stepping up the rate at which they are shifting operations overseas.  Elpida Memory Inc., for example, has decided to move about 40% of its facilities to produce DRAM chips to Taiwan.  Power shortages and high corporate tax rates at home are also acting as a heavy drag on Japanese companies.  Motohisa Furukawa, minister for economic and fiscal policy, said that when he met with corporate executives in Osaka on Saturday, he was told, “Once companies go overseas, they won’t return even if the yen weakens.”

Rumor has it that some Japanese bank predicted USD/JPY would eventually hit 60.

Really?  Maybe then, BOJ will say, “Enough is enough.”  They’ll act like SNB and peg Yen at 120.00 to Dollar.  That’s the day I like to see.

The Japanese government desperately tried to weaken their currency but no avail.  As long as their currency stays strong, their export continues to suffer.  Unfortunately, as long as the US and the Euro zone economies remain unstable and risky, people will stay away from risky currencies and turn to yen or Swiss francs.

The yen didnt flinch in Asia Monday even as Japans intervention-experienced Finance Minister Yoshihiko Noda emerged victorious in a ruling party leadership contest, a win that virtually guarantees he will become the countrys next prime minister.Dealers said the yen may rise further this week as concerns over the U.S. economy keep the save-haven currency in demand. Data from the Chicago Mercantile Exchange showed hedge funds and other non-commercial investors essentially maintained their bets on the yen in the week to Aug. 23, with yen longs up 12% since Japans Aug. 4 intervention.Dealers said Nodas election Monday as the next head of the Democratic Party Of Japan, which essentially guarantees he will replace outgoing Prime Minister Naoto Kan as the nations leader, should not hurt the yen because investors have seen his response so far and how the currency has continued to strengthen despite it.Even a new package against the yen that Noda unveiled last Wednesday, which includes a $100 billion fund to help spur investments by companies operating abroad and new rules requiring financial firms to disclose foreign exchange holdings, shouldnt have any major near-term impact, analysts said.

 

 

via WORLD FOREX: Yen Stays Strong Despite Japan Leader Shift – WSJ.com.