After briefly poking above the August 19 top at 1.3180, the December Japanese Yen failed to attract any follow-through buyers, encouraging a retreat from the all-time high at 1.3216 and causing many traders to wonder what last week’s rally was all about.
After consolidating for several months between 1.3180 and 1.2860, the Japanese Yen spiked up last week against the U.S. Dollar to its highest level since World War II in the Forex markets. The move came as a surprise since many traders were under the impression that the Japanese government was aggressively defending the Yen against any volatile, speculative rallies. Maybe it was buy stops being triggered, or maybe it was traders jumping the gun in anticipation of a resolution to the crisis in the Euro Zone. Whatever it was that triggered the surge brought a rise from the Japanese government who addressed the issue over the week-end.
Daily December Japanese Yen Pattern, Price & Time Chart
On Saturday,Japan’s finance minister Jun Azumi said that the Yen’s rapid acceleration amounted to nothing but a speculative move that may warrant the need for another currency intervention. “I would like to take decisive action on excessive and speculative movments,” Azumi said according to Kyodo news agency. Although this was only a verbal intervention, it served its purpose as the Yen has backed down a little from its lofty level.
The real question for traders is will the market take Azumi at his word or will speculators continue to take jabs at the market, hoping to trigger more buy stops and perhaps open the flood gates for additional buying pressure? Traders are also questioning at what level the Japanese Yen has to trade in order to draw the Japanese government into the market. Last week’s high was 1.3216. Will it take sustained closes over 1.3200 or a drive to a new high to trigger the intervention?
Although the December Japanese Yen has backed down from last week’s high, it doesn’t appear that heavy selling triggered the retreat. The longer the market stays at or near its all-time high, the more likely traders are going to take another shot at the upside. This will especially be apparent if the Euro Zone reaches a solution to its sovereign debt woes and traders decide to bury the U.S. Dollar. There seems to be a lot of pent up energy in the Japanese Yen waiting to be released. It only seems like a matter of time before bullish Yen traders take up the Japanese government on its challenge.
