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Sharp Move In Yen, In Alignment with Trend


Yen futures (6J) are trading higher by about 2.6% today after the Bank of Japan (BOJ) opted not to proceed with further monetary stimulus. The inaction of the BOJ fuelled buying as well short covering by those betting on further stimulus. Overall though, the sharp Yen rise comes amid an overall uptrend in place since the start of the year.

The daily chart shows a series of higher swing highs and lows, with a recent pullback to the 0.008950 region on the June contract. The price consolidated there for three days, before breaking that consolidation to the upside today, continuing the uptrend.

Unfortunately, taking a trade just before or during a major news announcement isn't always a good idea In this case, it worked out. Attempting to buy near the breakout level of the consolidation (0.009047) would have resulted in some slippage, but given the longer-term nature of the trade--with a stop loss below the consolidation low of 0.008947--the slippage wouldn't have had too much of a detrimental impact. That said, taking trades right before nears news isn't advised, especially for short-term trades, given the likelihood of slippage (the order filling at a far worse price than expected due to rapid movement and low liquidity).

Figure 1. June Yen Futures - Daily Chart

With the rally on April 28 the uptrend remains intact. 0.009308 is the recent high, and therefore may act as resistance (like prior swing highs did in mid-February to mid-March). Over the longer-term though, this uptrend could have legs into 0.0098. That's unlikely to be a straight-shot from here though, as this pair has a real tendency to consolidate and form ranges within broader trends. The support areas of those consolidations and ranges will provide buying opportunities in the future.

At this point a decline back below 0.008947 warns of a reversal back to the downside. Next support level is just above 0.0087, followed by the 0.0083 area.

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