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Yen roars ahead on astronomic volatility

06/11/2013  02:05
(Barcelona) - After having had a roughly 30% upmove in the USD/JPY driven by the radical shift in monetary policies brought forward by 'Abenomics', sellers of the Yen in recent weeks continue to get burn out, with today's fall, the sharpest 1-day fall in over 3 years, exemplifying that the tide is turning. Will it last?

With the ongoing upward pressure on the Yen, has come an enormous volatility, which, as described by Adam Button at Forexlive, it might have a lot to do with correlations-based algorithm programs either breaking down, no longer activated as money is starting to get lost or going haywire. As Button says, "All three of those options sap liquidity and drive volatility", adding that "In addition, the wild moves in markets have made traders especially jumpy."

Today's 300+ slide from highs at 99.26 down to 95.60 were prompted by the disappointment that represented the stand-off in monetary policies by the Bank of Japan during yesterday's call. The central bank stood pat failing to change the maturities of fixed rate operations something that was somehow expected to ease volatility in the JGB.

David Song, FX analyst at DailyFX, expects now the rate to trade within a broad range ahead of the next FOMC meeting on June 19 "as a growing number of Fed officials scale back their willingness to expand the balance sheet further" Song said.

By refraining to expand its non-standard measures while retaining the current terms of its bank-lending program and pausing its easing cycle, Song believes the market is poised for more whipsaw-like price action. However, the downside in the USD/JPY may be limited as long as the Fed remains poised to taper its asset-purchase program in the coming months, Song comments.

What is clears though, is that we are in a trading environment with plenty of trading opportunities. As Adam Button points, "before Abenomics we would often go a month without breaking a 150 pip range in USD/JPY, now we see wider ranges on a four-hour candlestick." The analyst for Forexlive reminds us that "JPY volatility hasn’t been this high since 2009."

From a technical standpoint, Valeria Bednarik, chief analyst at , foresees additional losses in USD/JPY.

Valeria notes: "The technical picture continues to be strongly bearish, with indicators heading south in oversold territory, and moving averages gaining even more downward slope above current price. A sustained break below 96.00 should lead to a test of 95.00 area while once below this last, 93.60, 38.2% retracement of these months bullish run, comes at sight."

Tim Riddell, Head of global research at ANZ, has an opposing view to Bednarik's, saying that any further decline "should be seen an opportunity to reposition for further JPY weakness through the coming year, rather than lead to a period of more pronounced consolidation."

After having had a roughly 30% upmove in the USD/JPY driven by the radical shift in monetary policies brought forward by 'Abenomics', sellers of the Yen in recent weeks continue to get burn out, with today's fall, the sharpest 1-day fall in over 3 years, exemplifying that the tide is turning. Will it last?

(Market News Provided by FXstreet)

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History

06/11/2013
Session Recap: Yen strengthens further
06/11/2013
EUR/USD challenges daily highs
06/11/2013
US markets grinding lower as BoJ stayed put
06/11/2013
USD/JPY threatening 96.00
06/11/2013
USD/MXN extends the downside below 13.000

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