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Bank of Japan sells yen in attempt to boost U.S. dollar

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Last night, the Bank of Japan intervened in the currency market and sold its currency in an attempt to stem the yen's strength against the U.S. dollar. While it has had some impact and the yen has declined from yesterday's 5-month high, it has had little impact on the U.S. dollar's decline against all foreign currencies.

Yesterday, the June yen futures contract (jy02m) broke above its 200-day moving average, a level of key resistance.

In Tokyo, the Ministry of Finance made it clear it directed dollar buying to rein in the yen. The dollar rose above 125 to the yen on the intervention, which dealers speculate began at $1 billion. But widespread dollar weakness persisted and the dollar eased to 124.60, marking a gain of just 0.4% on the day.

Currency traders site the recent declines in the U.S. Dollar due to investors pulling back on overweight positions in U.S. assets as a hedge against further dollar weakness.

In overnight trading, the actions by the Bank of Japan had gold moving higher. The June Gold futures contract (gc02m) jumped to yet another multi-year high and currently trades at $317.90, after hitting earlier highs in overnight action of $319.80.

Stock futures dipping lower

Stock futures are edging lower this morning as the S&P futures (sp02m) trade down 2.5 points at 1,080.60. NASDAQ futures are down 13 points at 1,247.50 and Dow futures are down 23 points at 10,100.

Fair value for the S&P 500 today is $0.25. HL Camp & Company has their computers set for program buying at $1.70 and set for selling at $-1.00. Fair value for the NASDAQ-100 today is $2.32.

Treasuries active

The U.S. Treasury market is active this morning and seeing some buy side action as YIELDS drop across the board. The shorter- term 5-year YIELD ($FVX.X) is lower at 4.415%, which is right back at the YIELD levels found from the April 25 to May 7th range.

This is a more defensive posture from the market and reflects some jitters among investors toward U.S. stocks and the Bank of Japans currency intervention. On the currency side of things, traders most likely thinking that buying of the U.S. Dollar will find it way into the perceived safety of the U.S. Treasury.

Jeff Bailey
Senior Market Technician
Option Investor

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