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Looking to Central Banks for Intervention

Written by A Forex View From Afar on Tuesday, October 28, 2008

The Bank of Japan will very likely intervene and sell the Japanese Yen, in order to give a helping hand to Japanese exporters.

The Japanese Yen strengthened this month about 15% against the dollar and 29% against the Euro, as the currency is being bought to cover the short positions from carry trades.

European authorities declared that the Bank of Japan should do the intervention alone, with no help coming from the ECB. The reason behind this decision may very well be that both the ECB and European politicians are more than happy with the low value of the single currency, after more than a year of being criticized for a strong currency.

Sources have also said that other central banks have intervened in the foreign exchange market lately. The RBA stopped the Australian Dollar depreciating during the last few days, after it fell almost 30% from its peak reach in July. Others also pointed to the Swiss National Bank for supporting the Swiss currency lately, in an effort to reduce the intra-day volatility. Central banks from emerging countries have also supported their currency lately against speculative attacks.

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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