The Aussie dollar has plunged against the Japanese yen during trading on Thursday as the Bank of Japan has clearly intervened.
With this being the case, it's worth noting that we didn't break new ground to the downside; we just tested support. It's also worth noting that the Japanese have intervened a few times in the past as well, and both of those have failed.
That is more or less measured in the dollar against the Japanese yen, but you can see the Aussie; really, the only difference here is that there was an intervention.
If the move to where we fell to happened over the course of, say, 6 or 7 sessions, people wouldn't bat an eye.
The AUD/JPY pair is still in the same consolidation area, and the Japanese are somewhat limited in what they can do. We're already starting to see buyers come back as traders continue to short the yen. They just put their positions on. I'm adding to my yen-denominated positions as we speak. I'm not doing it in huge positions; I'm just adding to it because they gave me value by intervening in the market.
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Central Bank Intervention and Market Realities
Whether or not they can change the trend, that's an open question, but that very rarely happens with central bank intervention. Central banks are not the omnipotent force that new traders think they are. What they tend to do is slow down the acceleration to the upside. Perhaps the Japanese were a little concerned about the relentless grind higher the dollar had been doing against the Japanese yen.
I could see why. But really at the end of the day, it's their own fault. It's the debt load in Japan, it's the ultra-low rates, because if you want to increase the value of the yen, you need higher rates, and if you have higher rates, that debt load really starts to destroy the economy. The Japanese economy and the Bank of Japan, by extension, has a lot of issues. It's one I'm willing to exploit.
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