Will wonders never cease? Once every decade the Central Bankers have someone on staff that can actually read a chart. I am speaking of the 1985 Plaza Accord, the 1998 Fed Intervention in USD/JPY that took it from 132 to 111 in short order. The day before the intervention I was a guest of AIG at the World Bank Conference in D.C. Every Big Hedgie got up and talked their long dollar short yen position “we’re going to 150 was the mantra.” One after another the folly continued. Yes this lunacy was reinforced by who else, some of the top economists of the day including 2 former foreign Central bank members. I turned to one gentleman at my table, whom I shall keep anonymous as he runs one of the biggest currency funds on the planet, leaned over and posed a simple question ( where are you wrong..do you have a stop?) No stop was the reply. I was actually on the phone with AIG London the next morning at 7:15 CDT and could not get a million dollars off during the intervention. When the rep said 117 given we both started laughing. Oh yeah, rumor had it the Vampire Squid bought 10’s of thousands of Yen calls in the over the counter market in London just minutes before the intervention. ( pays to have dinner with friends in high places). Now we have the G20 painting a convincing tape in EUR/JPY with an outside reversal quarter to the upside.

I’ve been eyeballing this trade for 4 months and I have not done a good job of getting everyone on board. Nevertheless, 119.60 is the next rejection area followed by 124.10 with the big resistance coming in the mid to high 126 handle. You want to get this trade on with any descent weakness in the cross as I believe this could turn out to be one of the biggest trades of the year.

AUD/JPY…CAD/JPY are putting in the same patterns with GBP/JPY close, but lagging.

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