The US dollar fell a bit against the Japanese yen early on Wednesday, as traders waited for the CPI print in the USA.
USD/JPY
The US dollar fell a bit against the Japanese yen early on Wednesday, but then turned around to show signs of life as we got closer to the CPI announcement early in the session. The CPI number out of the United States was as expected. So, with that being said, the US dollar, at least so far this week, has been the strongest against the Japanese yen as the Bank of Japan intervention seems to be kind of an annoyance more than anything else.
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The carry trade is still winning as the surge from the first US-Japan joint operation intervention in the market since 1998 has faded quite a bit. We've got about half of that back. The previous day was solely the Bank of Japan.
The intervention is still a possibility and, with that being said, it's very likely that you'll have to have a certain amount of bravery to get involved in this market. Short-term pullbacks could see the 200-day EMA offer support, unless, of course, intervention happens again. But if we can break above the 160 yen level, that would only heighten the possibility.
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Longer term, I'm still bullish on this pair. I just recognize you can't get heavily leveraged all in one shot. I've been in this for months. I never left this position even with the intervention that we've had 3 times now. You can see there have been 3 different interventions at varying amounts, and the latest one was, of course, a big deal.
But, fundamentally speaking, the Japanese have a choice. They can either have a bond market under control or a currency that just absolutely collapses. And destroying the Japanese economy is one way that you could keep the yen relatively bid, but furthermore, you have to worry about the overall global effect on this.
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So, I think really what central bankers are worried about more than anything else is slowing down the dismantling of the Japanese yen. This is something that's been coming for about 10 to 12 years now, and at least at this point, it looks like it's finally coming to fruition.