How can we profit after BoJ's intervention?

Yesterday, after more than 10 years, the Bank of Japan intervened in the market.
UsdJpy pair was very volatile and has a 550 pips daily range from top to bottom. However, thinking of previous interventions, yesterday's volatility represented around 2.5% if we take into consideration the daily close when in the past we had 5% moves...

But, what do we know from previous interventions?

First of all, they never worked, in fact from the past 11 interventions, BoJ was able to maintain "the move" in only one case, and that time wasn't a BoJ intervention, but a joint intervention in the markets alongside other central banks.
Second, and most importantly, we can profit from this.

So, how can we do this:

1. As I said, we know that BoJ intervention doesn't work and the pair resumes its previous trend. In UsdJpy we have a clear up trend and in such a case we should look for buying opportunities.


Using only support and resistance we can see that under 140 we have a very good level of support. So under 140, we should look for buying opportunities. Considering the resistance provided by the intervention, we can set a take profit in that zone.
Considering a hypothetical trade, if we buy at 139.50 with a take profit at 145.50, we have a potential 500 pips profit. As a stop loss, we can use a large and comfortable stop loss of 250 pips, which still gives us a 1:2 risk to rewards ratio, or, be more aggressive and use 138 as a stop loss and, in this case, we have more than 1:3 R: R.

2. Using the ceiling given by BoJ yesterday, which is 146. So, also a hypothetical trade: sell around that zone, set a stop loss of 150-200 pips and as for target, we choose the 140 support. In this case, we count on 2 things: first, we are backed by BoJ which "said" very clearly yesterday that is not comfortable with UsdJpy above 145, second, a lot of people will sell or close their buy positions there, using the same reasoning, putting pressure on the pair.



P.S: Keep in mind that levels provided in this article are for the sake of example, not specific points where to buy or sell.


Regards and best of luck!

Mihai Iacob