USDJPY March 11 – Yen Gaining on Earthquake/Tsunami

Defying my own expectations of a decline for the Yen, it was actually strengthened so much so that it wiped out a week of gains made by the dollar in one day, as you see I had a USDJPY chart prepared then so much extra volume came in the few hours I was asleep at the end of Friday I was forced to create a new chart.

For next week it is quite unpredictable due to the Earthquake and Tsunami disasters hitting Japan all at once but for now I would take care in my entries and always use a logical stops. Tough day to weather this pair no pun intended at all.  In fact, I was commenting, EURUSD, AUDUSD and now USDJPY all gained on the dollar today after the Tsunami news had been digested into the markets; why would the dollar be more affected by the Japanese Earthquake and Tsunami than the Japanese Yen itself?  Because we don’t even see much selling or buying on the EURJPY, almost laying dormant today except for a move from 113.00 to 114 that did not involve large spikes like the one we see here.

USDJPY week ending March 4

USDJPY followed suit with JPY strength before this week but the dollar did give it a run for it after three attempts to break 81.50.  Then a test of our downtrend line before ending the week slightly down.

USD/JPY in Late August 2007

Foreign exchange volatility remains at historical highs across the components of the carry trade basket. In fact, USDJPY volatility as implied by one month over the counter FX options is much lower than it was during last week’s carry unwinding and this more stable environment should make carry trade eye catching for many investors.

USD/JPY volatility OTC USDJPY options is lower than it was during last week’s carry unwind ( Last week IV jumped to 18 percent, nearly two times the average volatility of the past year).

With this much volatility, this should make carry trade more attractive for many investors.

USD/JPY Mid July

As you can see by the chart, todays trend is down.

I have been trading the usd/jpy for a while, traditionally I make the pips in the trend. The only way to know when the trend is in effect is to know how to read the “right” indicators.   Specifically,  learn how to use and read Pivots. The usd/jpy is the only currency that bounces off of its pivots meaning it can come to a dead stop on a pivot and turn right around and go back where it came from.