TOKYO, Oct 24 (Reuters) - Japanese policymakers on Monday continued efforts to tame sharp yen falls, including through two straight market days of suspected intervention, but ultimately failed to prop up the currency against persistent dollar strength. The yen's sell-off is hurting the world's third-largest economy by driving already surging import bills and challenges the Bank of Japan's commitment to ultra-low rates in the face of rapid global monetary tightening to combat rampant inflation. The Japanese currency jumped 4 yen to 145.28 per dollar in early Asia trade on Monday, suggesting authorities had stepped in for a second straight day after a similar move by Tokyo on Friday. "We won't comment," Masato Kanda, vice finance minister for international affairs, told reporters at the Ministry of Finance (MOF), when asked if they intervened again on Monday. "We are monitoring the market 24/7 while taking appropriate responses. We'll continue to do so from now on as well," said Kanda, who oversees Japan's exchange-rate policy. However, the yen failed to cling to early gains and briefly hit a low of 149.70 per dollar, as markets continued to focus on the widening divergence between the Bank of Japan's ultra-easy monetary policy and steady rate hike plans by the U.S. Federal Reserve. It last stood around 148.80. "In the past crises involving British pound and Italy's lira, authorities have ended up failing to defend their currencies. Likewise, Japan's stealth intervention only has limited effects," said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley Securities. "Strength in the dollar is the biggest factor behind the weak yen. If the United States shows signs of its rate hikes peaking out and even cutting interest rates, the yen would stop weakening even without intervention." Japan likely spent a record 5.4 trillion-5.5 trillion yen ($36.16 billion-$36.83 billion) in its yen-buying intervention last Friday, according to estimates by Tokyo money market brokerage firms. That is much bigger than the roughly 2.8 trillion yen Japan spent supporting the currency on Sept. 22, which was the first yen-buying, dollar-selling intervention since 1998.
Sunday | October 30, 2022 Notes to self: Look to buy these pairs if they crawl below the following prices... USDJPY 146.62 EURJPY 146.10 GBPJPY 169.97 USDCAD 1.3520 USDCHF 0.9896 Look to sell these pairs if they climb above the following prices... AUDUSD 0.6441 EURUSD 1.0011 EURGBP 0.8582
What Actually Happened? None of the pairs reached their designated thresholds. EURGBP came the closest (its target was 0.8632, and NOT 0.8582, as typed above) climbing to 0.8618, just 14 pips low. It was approaching any number of resistance levels at 4:50 AM PST, but was not confirmed as being turned away until after the 45-minute baseline hooked south at 7:20 AM, following its rebounding off the 1⅔-hours and 24-hour temporal resistance levels while the rate was somewhere around 0.8684. It fell as low as 0.8573 for a maximum of 11 pips potential profit. In hindsight, there were a number of clues that this is when the position needed to be exited in that here price met up with the lower bands of the typical two-hour, 90-minute, one-hour and 45-minute price ranges. Wait...that's incorrect given that AUDUSD rose as well, to 0.6427 at 7:20 PM last night, and it too was just 14 pips away from its target. Confirmation of a reversal south (in the form of dropping resistance levels along with a freshly descending 45-minute baseline) came at 11:45 PM, when the rate was at around 0.6416. If the position had been exited when price hit support levels at 0.6389, that would have meant about a 27 pip gain. However, following a total of three pullbacks, the rate ultimately dropped as low as 0.6368, so up to at least 46 pips of total profit was available for anyone able to ride the waves competently. EURJPY rose to at least 147.66...twice...in accordance with its bullish characterization, but then fell back down to below the open. But then again, should this be any surprise given that 147.66 constitutes the top of the projected day range? EURUSD fell, as its bearish diagnosis would have suggested it might, and at 0.9874, is currently near the bottom its projected day range. (By the way, this pair has been coming down for months, but is presently in the upper region of the six-day price range, so it still has a lot of room below if it's inclined to continue its trek south, despite that fact that it dropped something like...what...70 pips during the current market cycle?) (GBPUSD also has a lot of room to fall.) And so it's like that, all the other pairs rose if they were deemed bullish, and fell if they were deemed bearish, up or down to their projected price ranges more often than not, after which they usually retreated somewhat (especially GBPJPY, which was already at the top of the previous day's day range). So, in conclusion, only two of the pairs pulled back significantly, and if you had set a take-profit target for all the others half way between their opens and their projected day ranges, it appears they would have all had profitable outcomes.
Today's AUDUSD sell zones (one and two) and the general location of the intraday baselines' trend reversals.
Drawing horizontal lines on my daily charts to mark the floor and ceiling of projected day ranges (buy and sell zones) and then redrawing them on my lower-time-frame charts for trading during the day is too tedious a task for me. I have therefore translated them to the lower-time-frame charts instead so that I have a rough idea of where the highs and the lows for the day have a higher probability of occurring as the day progresses. To save memory, I sample the data at regular intervals, which is why I end up with squiggly lines. But, that's good enough to provide me with visual graphics suggesting where I might start considering buying or selling a given foreign currency pair within any 24-hour market cycle.
From an Eight-hour Perspective... As of Saturday, December 17, 2022 AUDJPY is decidedly bearish. AUDUSD is essentially at a decision point. Does it resume a downward trek, or adopt a new direction to the north? EURGBP looks like it will try to reverse direction and head south now. EURJPY switched from bullish to bearish on Friday. So did USDJPY. GBPJPY did so as well (after switching from bearish to bullish on Thursday). EURUSD is mildly bearish. GBPUSD is still bearish, but is losing momentum. USDCAD is solidly bullish. So is USDCHF.
As a career educator with no children of my own, the only obvious legacy I might be leaving on this planet is likely to be in the form of the instructional institution or institutions I establish and operate in my lifetime, if any. So, as part of my preparation for when and if that day ever comes, I checked out the book Currency Trading for Dummies from the main branch of my local library for ideas on topics I might opt to include in the instruction delivered to junior traders hired by the hypothetical prop firm I've envisioned. The book lists a number of strategies to help readers choose the right trading strategy for them and provides them with tips on implementing those strategies. Since I doubt I'm going to abandon my own system to implement any of the strategies they describe, I plan to instead compare and contrast them with my own approach to evaluate WHY it is that I prefer to continue using my own methodology. The fist strategy I'm going to look at is what they call The Red Zone Strategy. It evokes the analogy of an American football game, and refers to the final 20 yards before the end zone, where good teams supposedly have historically scored a touchdown 50% to 70% of the time (analogous to the penalty area in what the rest of the world calls football, but Americans call "soccer"). The claim is that the same can be applied to trading, where an instrument is more likely to continue progressing until it reaches a round number if and when it come to within 20 points of that figure (i.e., markets tend to gravitate toward round numbers). It is supposedly a potentially effective strategy when applied to buying and selling around high-impact economic data (i.e., news trading). However, the first problem I have with this strategy is that, unless an individual is going to go through the rigorous, time-consuming process of verifying these numbers for himself or herself, or is able to hunt down objective studies which bear this out (which I acknowledge, might be out there, but if so, were never cited in the book) then one must take in on faith that this is actually the case. Second, even if this is an actual phenomena, whose to say that there won't come a day when the Red Zone increases up to 30 points, or shrinks down to 10 points. How would one know if and when this happened? So, you run into the potential problem of a strategy that used to work no longer working; whereas Numerical Price Prediction (NPP) relies on the assumption that, unless something goes horribly wrong with the universe, up shall remain up and down will continue to be down. In that this is what NPP is designed to measure, unless these properties change, the system should continue to yield positive outcomes, regardless of the changes that take place in the market(s). Third, if you look at the first example pictured in the book, it is obvious that picking a price 20 points from the next round number resulted in an entry level that left a lot of potential profit on the table by executing the trade long after the rate had broken out of its "normal" range, something which NPP would have picked up on (or recognized) immediately. In the second example, in addition to the above mentioned problem (which is repeated) there is a 20 pip loss when the rate fails to hit the take-profit target. But, had the NPP system been in use instead, the trader could have theoretically exited the position as soon as the forecast model detected a reversal in the intraday trend, thus holding on to at least a few pips profit, or at a minimum, getting out of the trade at break even.