Analysis - a potential Yen intervention and Central Banks

Last Friday 21st October 2023 we had another epic rollercoaster in the marketplace. Taking into consideration that the markets are completely nervous with several factors coming into play ( war, inflation, stagnation, gas and food), turmoils have become nearly normalised these days. 

We have seen the GBP meltdown like ice to its record lows, while euro keeps diving against the US dollar (keep in mind winter is coming and it is going to be a hard one) and the yen hits its over 30-years record low as well, against the greenback. 

Central Bank divergences between FED and BOJ are also amongst the variables to consider (until a change of stance in either of them), yet such a sharp depreciation of yen would cause, and has caused what seem to be interventions by the Bank of Japan. 

I have continuously mentioned that in this scenario (JPY at its lowest level in decades) the real danger was in massive profits taking, or market interventions. 

Which we could see on friday. 

As a general rule, you do not see rallies of 500 or 600 pips in one hour, in a calm marketplace. Well marketplace is NOT calm and rallies are happening here and there and this happened in USDJPY, which was rising nearly up to 1.52, and cascaded down to nearly 1.46 cents, after which it had a brief recovery of above 100 pips. As we speak, USDJPY sits in 1.4750 more or less, and expect more turmoils this Monday. 

This upcoming week we also have Central Banks action, so better to fasten your seatbelts and understand not only hikes or cuts, but also stances, and use these variables wisely in the current (oversold) marketplace:

- Wednesday, Bank of Canada announcement, expecting a hike of in between 50 bps to 75 bps

- Thursday, European Central Bank announcement, expecting a hike of 75 bps

- Friday, Bank of Japan announcement, expecting no change in the yen loose monetary policy in -0.10% (although we are experiencing what seem to be interventions against the depreciation of the currency)

Have a safe week ahead,

Renaissance Capital Markets Limited (Hong Kong)