Is The Yen Sell Off For Real? |
The Reserve Bank of Australia held its policy meeting on Tuesday. Pretty much as expected, the banchmark interest rate was left unchanged at 4.75%. For all the talk about inflation and the supposed pressure the central bank is under to take action, the RBA has not done anything since November last year. So, after a couple of hikes in 2010, it has been almost half a year of inaction. Perhaps the economy Down Under is not as red-hot as some sources would lead us to believe.
Interestingly, the Australian Dollar has not responded almost at all to the announcement. But it had been falling slowly for several hour before, since making the all time high against the US Dollar at 1.0416, evetually dropping to as low as 1.0287. In the end, the Japanese Yen had a more interesting day, I think, getting progressively weaker, with a sudden acceleration very late in the day. Chances are that the JPY has turned for good and could be losing ground for months to come. If central banks start raising rate soon, as many predict, the Yen could once again become the funding currency for a carry trade.
Of particular interest to me is the beast, where I have a long position. I discussed a buy in GBP-JPY couple of days ago, with entry above the Friday’s high. I my case that was 135.95. Objective for this trade is about 500 pips, however, the advance was fast enough that I decided to lock some gains, by closing half of this position, for 275 pips profit. I can only hope that the Yen sell off continues…
The rally in the beast was not caused exclusively by the slumping Yen, but was helped by a surging Pound, too. It has been long in coming. I misjudged it before, when I prematurely went short the EUR-GBP. After that losing trade I was simply trailing the lows with a sell order, which was hit yesterday at 0.8795. The main move came today and I closed this trade about an hour ago for 71 pips in profit. For now I will step aside, although expectation is for more trades on a short side.
No new trades at the moment. In the next post I will update other trades covered on these pages. Besides, Wednesday could be a strange day due to plenty of big time announcements scheduled for Thursday, which I will cover tomorrow. Have a great trading day!
Mike K.
About the author: Mike Kulej
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