【Dollar-Yen】Plunge on Trump remarks → Sharp rebound | Expected range until Bank of Japan policy rate decision
The USD/JPY once again found itself being swayed by Trump remarks.
From the 159 yen range, it suddenly plunged to around 157.6, but then rebounded sharply and closed around 158.6.
A market that moves almost 2 yen in just a few hours. When you panic and chase in such times, you get hit with a back-and-forth beating. I want to calmly sort out the situation.
What happened with Trump’s remarks
The trigger for this sharp drop was President Trump’s remarks.
Right after the remarks, selling rushes in, and the USD/JPY plunged from the 159 yen range to around 157.6 in an instant. A drop of more than 1 yen occurred in just a few minutes.
However, the subsequent movement is what matters. It found support at 157.6 and then rebounded sharply to around 158.6. In other words, after the selling wave subsided, buying came back strongly.
This indicates that while it fell due to Trump’s remarks, there isn’t a strong fundamental reason for it to go lower.
Expecting to return to the upper 159 yen region
In my view, it will likely move back up to the mid-159s from here.
The reason is simple: this decline was a temporary shock caused by the remarks, not a trend reversal.
The fact that there was a sharp rebound after the drop means there are still many buyers at the lower levels. Sellers rush to take profits, while buyers see it as a dip to buy. As long as this dynamic continues, prices tend to return to their original level.
Range trading expected until the Bank of Japan policy rate announcement
The next major event is the Bank of Japan’s policy rate announcement.
Until then, the market will find it hard to set a direction. Sudden moves like Trump’s remarks may occur, but it’s unlikely to continue in one direction as a trend.
In other words, it’s a range.
Upper around the high 159s, lower around the 157s. The expectation is for a to-and-fro within this range.
What to do in a range market
The most important thing in a range market is not to chase a breakout and buy at the top or sell at the bottom.
If you buy thinking it will break higher, you’ll be pulled back. If you sell thinking it will break lower, it’ll rebound. This is the trap of a range.
Correct approach in a range market is:
・Sell at the upper bound, buy at the lower bound
・Set tight take-profit and stop-loss
・Don’t force positions; enter only at clear setups
・Lighten positions before the BoJ announcement
This last point is especially important. No one knows which way the BoJ announcement will move. If you have too many positions before the announcement, you’ll suffer big damage no matter which way it moves.
How to deal with Trump-market moves
Moves in markets driven by President Trump’s remarks will continue to recur.
If you let yourself be swayed by this every time, you won’t be able to endure financially or mentally. The three key points are below.
・Don’t jump on the initial move right after the remarks
・Confirm the rebound after the drop before entering
・Know that “moves caused by remarks often return”
This time, it plunged to 157.6 but ultimately recovered to 158.6. Those who sold in panic right after the remarks ended up selling at the worst timing.
Conversely, those who calmly confirmed the rebound after the drop and then went long have earned more than 1 yen in profit.
Wait without rushing. This is the only way to survive the Trump-market.
Summary
・Trump remarks pushed from the 159 yen range to around 157.6
・Then a sharp rebound to around 158.6
・Expect a return to the mid-159s
・Range expected until the BoJ announcement
・Sell at the upper bound, buy at the lower bound
・Don’t jump on the initial move after remarks
・Lighten positions before the BoJ announcement
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