USD/JPY plunged in early Asian trade in a flash crash to a 3-year low at 101.18 before jumping in choppy trade to 103.00 before settling in a 102.00-102.70 range. The Dollar is still heavy against the Yen with 16 basis point tumble in the US 10-year bond yield to 0.55%. Japan’s 10-year JGB yield, in contrast dipped 3 basis points to -0.18%.

At the height of the volatile trade, Japan Inc (Japanese finance and monetary officials) warned that they would respond appropriately when necessary to curb excessive volatility in the Yen. The one thing that Japan Inc do not want is an appreciating currency and a falling equity market.

If the USD/JPY sees further big drops and the Nikkei continues to slump, traders may well be warned and vigilant of any Bank of Japan/Ministry of Finance intervention. The last time that I recall they intervened was during the tsunami in March 2011. The BOJ sold Yen to weaken its value. This was followed by the ECB, BOE, US Fed and BOC. The Nikkei and USD/JPY both gained.
This may not necessarily be the case today but as a trader their warning should be heeded if we see further quick Yen appreciation.

USD/JPY has immediate support at 102.00 followed by 101.50 and 101.00. The 101-101.50 level is crucial, and any quick move below may elicit some BOJ action. On the topside, immediate resistance lies at 103.00 and 103.50.

Speculative market positioning in the last COT report saw an increase in JPY short bets to -JPY 56,389 from -JPY 27,221. This would’ve been corrected by the moves in the past two days. We will examine the next COT report which should be due out tomorrow.

Meantime look for another choppy trading session with a likely 101.70-103.10 range today. Just trade the range shag, today. Tin helmets on.