FX Trading - Strange Days

Here's the story thus far. 

- In March, you had a rare G7 co-ordinated intervention to weaken the JPY after The Disaster; what they were ostensibly after was market stability. 

- Earlier this week BOJ Governor Shirakawa gave everyone a heads up when he warned "we are now expecting production and gross domestic product will decline in the first quarter and the second quarter." 

- Of course GDP figures then came out indicating a technical recession, and this helped to take USDJPY above 82.00, where it has stayed below since late last month. 

- Then the BOJ today surprised some by voting not to take any measures to stimulate the ecnomy, although they are still likely to do so later in the year. 

- But what took the cake was the BOJ Governor today saying that while a strong JPY would put pressure on the economy in the short-term, it would be positive in the long-term, such as helping companies buy overseas firms. Well, forget long-term, we've already seen the biggest international acqusition this year, and it's a $13.7b takeover of a Swiss pharma by Japan's Takeda Pharmaceutical.

So perhaps it's clear now. They do want a strong JPY. I hope all the crazy USDJPY longs out there are listening. On the other hand, China has just been in the market buying USDJPY, and Nomura has a buy recommendation out, so the longs are probably safe for a while. Either that or something got lost in translation.

As I write this EURUSD is selling off almost 100pips after a strong run towards 1.4350 earlier today. Quite expected given weekend risks with Spain's local elections on Sunday. Apparently we may even see some hidden debt coming to light if there's a change in office-holders, so keep a look out.

Peace