The June 2013 Japanese yen was having a nice ride up, which started on March 21 with the bounce up off of 1.04100. By April 3, the yen hit a high of 1.07920 closing at 1.07730. The very next day, April 4, the Bank of Japan (BOJ) announced the doubling of stimulus, sending the yen crashing down 367 points to close at 1.04060. On April 5 we saw the yen drop another 164 points and on April 8 another 156 points. All total for a three-day move down of 687 points or $8,587.50.
Today many are saying the yen dropped down too fast, but what exactly was the response the BOJ was looking for? And how many of you recall a month or so ago the Group of Seven came together saying countries need to stop using monetary policy to manipulate their currency, huh? Even the G20 got involved specifically mentioning the yen’s large drop down from the fall of 2012.
Proceed to Page 2 for the latest COT Data...
On the weekly chart we see in the Legacy Cot the Commercials dropped net longs to 116,441 contracts. On the more transparent Traders in Financial Futures we see Dealer Intermediary continue dropping net longs to 74,539 contracts, Lev Funds dropping net shorts to -63,574 contracts, and Asset Managers have for some time been dropping net longs, now at 7,903. These are all bull moves in a bearish posture. If this continues week after week, even with BOJ’s actions, the yen will rise.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
On the daily chart below you can see the chart damage caused by the BOJ’s actions. ADX once again rose with a sharp move of DI- crossing up over DI+ with a large increase to DI Differential. Actually showing strength once again to the trend, which was dropping. Stochastics dove down from overbought territory to hit bottom in deep oversold territory and MACD crossed down below the signal line adding divergence. At this point I am not sure if the Yen will continue dropping to test 1.00000. I am thinking we could see a pullback or at least profit-taking. Bears may have pushed too hard and need to catch their breath.
Click to enlarge.
On the weekly chart, check out the spike mid-March 2011. This was caused by the earthquake and the G7 actually got involved to lower the yen. How did they do it? Look at the COT report and you will have your answer. For now we will need to see how the weakened yen has helped Japan’s exports. If more help is needed, we may see price action like we saw back in 2006 and 2007. Price action then was 80-90. But first let’s see if the yen even gets to test 1.00000. Have a prosperous week.
Have a prosperous trading week.
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