I’ve been doing some checking over the last 24 hours, after I heard that there were almost EUR10 billion worth of stop-loss sell orders below 97.00. It seems to me that the market is ill-prepared for a sharp move lower with retail leveraged accounts and option books all tending towards being long. If we throw in the fact that the market is also very short of EUR/USD already, perhaps it’s USD/JPY which might give way?
75.00 is the big level to watch in USD/JPY as there will be ‘huge’ stop-loss selling below there, much of it margin-related similar to what happened after the earthquake last year. I’m sure the BOJ/MOF are well aware of this and will do they can to ensure that USD/JPY gets nowhere near there and if it does, that it happens slowly thereby allowing the market time to prepare.
I asked 7 traders where the next 10 big figures will come from in USD/JPY ie 66.90 or 86.90 and all 7 categorically stated that it will most certainly be 86.90; that’s what worries me about USD/JPY!