FX.co ★ Technical observations of USDJPY currency pair

Technical observations of USDJPY currency pair
Recently there have been many requests on how to deal with USDJPY. An interesting question indeed. I have been monitoring this pair for a rather long time, wondering how much time this tendency is going to continue for. How patient Japanese authorities will prove to be. Their patience seems to be coming to its end.
A couple of weeks ago Japanese authorities made another attempt to lower the rate of their currency. On August 4 Japan carried out intervention in the currency market and spent 4.6 trillion yen. It turned out to be the biggest sum for the entire history of interventions. I suppose that the target was at least 80.00, though Japanese exporters are sure to consider it insufficient.
According to the latest data, they will feel more or less comfortable with the levels of 86.00 and more in the chart.
It had its effect, temporary though. Traders rushed to buy yen as a shelter currency. The Japanese authorities then started to argue that interventions should be joint as this is when they have real effect. They are right, to some extent.
Let us get back for a second to the happenings on Forex of March 2011 following the Nuclear Power Plant earthquake. The G7 government agreed to carry out a joint intervention to calm speculators down. Japanese authorities did it, which cannot be stated for sure about other participants. Most likely, no one took part in it except for Japan.
Speculators were frightened and so the yen rate was not lower than 80.00 for a long time. At that time the effect was supposed to be as follows: speculators would get concerned and cease hysterically buying the Japanese currency. It did work! Why not try again?
The last speech given by Japan’s Vice Finance minister Nakao is strongly suggestive of Tokyo being really annoyed by foreign investors using the yen as a shelter currency amid increasing financial tension in the world. Here are some Nakao’s quotations:
“We don't think recent yen moves really reflect economic fundamentals, there is an element of speculation" behind it”.
He added that government has no plans to start a sustained intervention campaign with an aim to retain the yen rate at certain levels, yet if necessary appropriate measures will be undertaken. Mr. Nakao said that "we don't have plans to intervene often." He added: "We don't use intervention as a daily tool."
He also said that Japan’s economy has not yet overcome the consequences of tsunami of March 11. In this context such national problems as shrinking population and debt troubles mean that "there is no reason that the yen should be regarded as a flight-to-safety currency".
"At least...we sent a very clear signal of the authorities' intention to discourage speculation," Mr. Nakao added. But he said he does not think unilateral intervention "is precluded as a tool to stabilize the markets," though he emphasized: "Consultation with other nations is required even for solo intervention."
And he said he does not see the pre-eminent status of the American currency or U.S. debt in global markets changing any time soon. "I myself believe that the U.S. dollar will remain the most important single key currency in the world for the foreseeable future," he said.
There is no point in making his words any clearer. Additional look on charts gives us a rather curious picture, taking into account that the price is now at its new all-time low.

The more detailed the scale is, the stronger MACD is. In a monthly chart it is in fact serial and strong enough to be broken. Let us put aside all other technical subtleties so far and wait until the formation is over. Under such circumstances long-term buying of pairs from their current levels. 87.00 level may be well targeted. But please keep in mind: long-term tactics is not for small deposits. For these the simplest variant is buying at 76.00-76.40. Targets should be placed at 79.30-80.00, stop orders – individually, in compliance with MM.

alexey.goncharov@analytics.instaforex.com