USD/JPY, BOJ, Intervention

Many would view USD/JPY at 140.03 and say the price is to high, BOJ will intervene. We’re hearing rumblings from a few regarding intervention. The current price is not the view to intervene but the range of BOJ prices in relation to the interest rate. Notice the singular word to rate. The BOJ only has 3 interest rates and 1 interest rate to serve as the middle bound rate. So we have only 2 rates.

USD/JPY 140.03 is the beginning to view possible intervention. USD/JPY in relation to interest rates runs aa follows”

131.76 and 148.80

140.17 and 139.89

127.84 and 153.37

Broken down.

131.76, 144.41 and 148.80

140.17 and 139.89

127.84, 146.70, 153.37

From 148.80 to 140.03 = 877 pips and 1334 pips from 153.37 to 140.03

The top price for USD/JPY was 151.93 when DXY achieved 114.79 highs. BOJ intervened October 22 at 149.00’s and 150.00’s and drove USD/JPY to 146.00’s.

Let’s go with 151.93. What did October 22 look like for BOJ interest rates and USD/JPY.

143.26 and 161.11

152.08 and 151.77

139.77 and 165.14

Broken down

143.26, 156.52, 161.11

152.08 and 151.77

139.77, 158.53, 165.14

161.11 minus 151.93 = 918 pips

165.14 minus 151.93 = 1321 pips. Now compare above and below. 877 pips Vs 918 pips and 1334 pips Vs 1321.

Same numbers to distance from present exchange rates today and OCT 22. Because interest rate difference was 70 points from today to OCT 22. The BOJ topside and middle interest rates didn’t change but the bottom number changed by lower at 70 points.

And the bottom side interest rate number I assume was the verdict to intervene. The exchange rate is the key as BOJ interest rates hardly move any great distance day to day. But BOJ interest rates don’t have to move as a slight change by 1 and 2 points can really move USD/JPY.

The BOJ topside number today is 0.941 and OCT 22 = 0.943. The bottom today 0.913 Vs 0.920 on October 22 and 70 pip difference.

The October intervention send USD/JPY to 146.00’s. USD/JPY 146.00’s is found from 152.08 to 143.26 or 147.67.

BOJ interest rates are the easiest and quickest to factor for exchange rate trades. And this validates my friend’s statement that many money managers in Japan trade all types of currencies.

Overall, exchange rates are in the same situation today as Oct 22. The topside is to high in relation to interest rates.

Brian Twomey


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