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Bank of Japan (BOJ) Rocks Yen Futures

Yen futures and currency markets saw massive moves very early on Friday morning (October 31) as the Bank of Japan (BOJ) indicated it would continue to increase "monetary stimulus that tends to devalue the currency" according to Businessweek. The decision moves the monetary base from 60 to 70 trillion yen to 80 trillion.

Yen futures traded near 0.00915 just before the announcement and plunged to 0.008950 within a few hours. The price has continued to decline to a low of 0.008918 in the early US session.

Figure 1. December Japanese Yen (6J) Futures - 15 Minute Chart


This was a shock to the currency and futures markets, which is having an affect across the board. With the yen fall, other currencies have risen, including the USD, which is resulting in Gold (GC) and Silver (SI) seeing large down moves on October 31 as well.

Technically there's little support until the 0.0082 and 0.0081 region in yen futures, levels not seen since 2007. The next Fibonacci extension target, based on the decline commencing in July, isn't until just above 0.0087.

This isn't a trade to get into at the moment since so much of a move has already occurred, but pull backs or a consolidation will present another opportunity. Volatility is likely to continue in the coming weeks as traders try to figure out what this means for the yen long-term.

Potential trade ideas will be proposed when a consolidation or pullback occurs on the daily chart.

Figure 2. December Japanese Yen (6J) Futures - Daily Chart


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