That's probably the most he's ever moved a currency
Yesterday morning I spoke about the intraday longs that were running the euro up into the ECB meeting. My main concern was that the more they drove the price higher, the greater the opposite reaction would be if Draghi didn't turn out in their favour. The price action spoke for itself.
So I'm now wondering if we're starting to see the same thing happen in USDJPY. Ok Tarullo's comments weren't anything really incendiary but we've learnt a lesson. We're moving into FOMC mode and all that comes with it. That's increased scrutiny of the data and increased scrutiny of Fed speakers. The magnifying glass is out and the market is going to be analysing every word and number as it tries to work out what the Fed will do.
The lesson we now know is that if the market is going to act that way, we need to be ready. Tarullo's comments at any other time wouldn't have been blinked at. Coming straight after a hawkish Rosengren (big news in itself), now it's big business.
USDJPY will go where it wants to go and the same rule applies to it in the run up to the Fed as the euro did yesterday in the run up to the ECB. The higher it goes, the greater the reversal risk if the market doesn't get what it wants. The difference for this pair is that there's more at stake here as this is moving many days before, and it's not an intraday thing like yesterday.
Run with it if that's what you want to do, be cautious about fading it if you agree that the rally might still have some legs, just don't get caught in the middle. Trade the levels like you would normally but have what I've said somewhere in the back of your mind before you do.
I wish you all a great weekend.