Comparing BoJ interventions and Anticipating Future OnesJapan's PM Kishida claims, he cannot tolerate excessive FX moves by speculation. But given the circumstances of the message, I understand 'speculation' as an excess of supply and lack of demand. Anyway, I will not argue with the correctness of his wording, political or otherwise, and will just compare the similarities.
► The interventions started after breaking 145 and 150 (151) price levels respectively.
► First, the levels were gently grazed by a candle which later becomes huge doji with above-average volumes closing below such price level. This is likely an anticipatory price action and not a part of the intervention.
► After the price breaks above the key levels for the second time, it stays there for at least an hour into either London or New York session before the intervention starts.
► Both interventions took the price down roughly 3.4% in less than 90 minutes. The low of either intervention was never breached.
► It is likely a mere coincidence, but both interventions were conducted on the 22nd and 21st day of the month. What may be less of a coincidence is that both of them took place in the latter part of the week. This suggests some planning, not just reacting to the level.
► I would argue that the trigger level of the second intervention was not 150 but 151. If that was the case, no key session has been allowed to close above a trigger level.
► Lastly, I would like to point out that the first intervention took the markets off-guard. Not the second one. Raiders, me-included, actively bought the dip not allowing the bottom to be revisited at all.
Bank of Japan is expected to continue intervening until it is forced to change its interest policies. Unfortunately for Japan with its 238 Debt to GDP ratio, higher interest rates may be extremely painful, so it will attempt to solve its large problems with a small plaster and hope for the best. In the meanwhile, Japanese people will pay a large and increasing sum for the imports that used to be cheap.
I think this is a lesson for countries that did not board a debt spiral. Don't! All debts have to be paid including the state debt. But with states, the due date may be postponed till future generations. These future generations did not approve any loans to spend on populist policies, so indebting your country is, in my opinion, a theft from future generations.
As individual traders, we didn't create these troubles for Japan and can't stop them either, so we may as well take some profits. The first interventions knocked me out of my fresh long positions, but I used the other as an entry opportunity and boarded soon after the low was created. Even if it turns out unsuccessful, I think it is worth a potential upside potential.
It is hard to predict the next levels of the intervention will take place from. Miyamoto Musashi, one of the greatest swordsmen of Japan, once said that in battle, you may do the same thing once, twice, but never three times. Hence, none of the similarities may be relevant. But it is central bankers with tied-up hands we are dealing with, so I suggest looking for some of the mentioned parameters. Namely - a pinbar, round levels such as 155, 160, 17th Thursday, 18th Friday, and the following week, and bottoms in the aftermath.
Good luck! Long live Sauron!
