USD/JPY V JPY/USD: Levels, Ranges, Targets

If we hark back to first principles of currency trading then traders would understand the uniqueness yet non normality to USD/JPY. When JPY/USD moves 1 pip, this 1 pip represents generally 12 USD/JPY pips. This 12 number can however change daily, weekly and even monthly to 14 pips or 10 pips.
The number requires a daily monitor for price location, trend, range, support / resistance, central bank exchange rate management and overall central bank intent. Central banks are more active in exchange rate management today than I’ve seen in all my years therefore monitor is an imperative. An opposite example to JPY 12 is EUR/USD is currently running 1 to 1 pips in USD/EUR and quite a strange situation.
For JPY, 12 is a big move yet its not extraordinary in the life of currency pairs especially Asia pairs. It means ranges in USD/JPY are quite large and this means range breaks are far far away from current prices. This was done by design.
USD/JPY closed at 112.16 but JPY/USD closed at 0.008915 which is actually 112.17. If JPY/USD moves to 0.008916 then USD/JPY heads to 112.15 and 0.008914 then USD/JPY goes to 112.18. What drives the USD/JPY and JPY/USD relationship is the 6th decimal point in the exchange rate and this is unique compared to a vast majority of currency pairs.
If JPY/USD is viewed from 0.00891 then USD/JPY is actually 112.23 and 7 pips off from the 112.16 close. JPY/USD at 0.00892 then USD/JPY is actually 112.10 and 0.00890 then USD/JPY is 112.35. From JPY/USD 0.00890 to 0.00892, USD/JPY range is 112.10 to 112.35.
JPY/USD at 0.00854 is actually USD/JPY 117.09 and 0.00855 equates to USD/JPY 116.95 and 0.00853 factors to USD/JPY 117.23. A 1 pip difference up or down in JPY/USD calculates to 116.95 to 117.23 or 27 pips. USD/JPY then is running 14 pips down V 14 pips up against a 1 pip differential. The Odd / Even thing is maybe a topic for another day but the basics is exchange rate support and resistance in many instances run on odd and evens on many days. All Odd exchange rates will run supports and resistance points on ODD numbers and vice versa for Even days.
Note JPY/USD at 0.0085 factors to 117.64 and 0.0086 figures to 116.27 while 0.0084 equates to 119.04. Failure to factor JPY to its respective exchange rate level will result in a terribly wrong forecast.
JPY/USD at 0.008915 and many decimal places should alert traders automatically that JPY/USD as an exchange rate is born and priced in the 1600 and 1700’s from the Silver tradition because its 0.00891 price is so vastly low but Asia pairs are all derived from the Silver tradition. To Westernize JPY, the BOJ gained access to London money markets in the 1930’s by Pegging JPY/USD to GBP/JPY. Now we have GBP/JPY 139.81 as 0.007152 vs JPY/ USD at 0.00891 or 112.16 vs 139.81. USD/JPY V JPY/USD is the difference between a Silver and Gold price as Silver and Gold was the preferred method to trade exchange rates for the past 300 years.
After WW2, USD/JPY was further internationalized by the allies when USD/JPY was priced at 360.00 or 0.002777. USD/JPY at 50% point is 236.08, a further 50% at 174.12, further 143.14, further 127.65, 119.90, 116.03, 114.09 and 113.12.
What drives JPY in the modern day are Tibor and Euroyen interest rates. Tibor rates are internalized as an Onshore interest rate to Japan trading while Euroyen is the Offshore Rate. Brazil are the absolute masters in the world as they perfected Onshore v Offshore Exchange rates and its my speculation the BOJ went to the Bank of Brazil ( Bacen) to perfect the onshore V offshore scenario. But Tibor and Euroyen don’t move much anymore these days so much iteration is needed to derive a forecast.
USD/JPY break points are located 112.89 to 109.40 or 0.008858 to 0.009140. USD interest rates are dropping lately therefore USD/JPY drops are well explained. JPY/USD ranges are so wide, a range break above is located at 117.09 or 0.00854 and 107.52 or 0.00930.
USD/JPY range breaks are located at 112.83 and 111.48. The points we’re watching extraordinarily close over many many weeks is currently 113.45 and 111.90. If USD/JPY breaks 111.90 then down further she goes. A break higher at 113.45 is needed to see 115.00;s and range break point at 116.20’s. USD is the clear driver and driver to the vast majority of currency pairs. Lower interest rates then down will go USD/JPY. The break higher at 112.89 and 113.45 informs USD interest rates rose and will support a higher USD/JPY.

One point to add is exchange rates are an exact science with well known methods and formulas in place for hundreds of years.


Brian Twomey, Inside the Currency Market,


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