Today Japan recorded the highest inflation level since 1991. Traditionally, based on purchasing power parity, this would in effect weaken the Yen against other currencies.
In addition to the inflation, other economic figures were out today. National core consumer price index (CPI) and housing starts beat estimates, uneployment rate stayed the same while Tokyo core CPI and preliminary industrial production missed targets. While the Tokyo core CPI did not meet estimates, it was still higher that the figure last month (2.9% versus 2.8%)
Initially I went in long for GBP/JPY based on what I expected the effect of inflation would do to the Yen. On a regular day, an increase in inflation without any other external influence would weaken a currency. The bigger picture here is that the inflation growth today is actually a catalyst for the Japanese economy and would positively impact other aspects such as a hike in wages.
The right call was to short either GBP/JPY or USD/JPY. I opted to short USD/JPY as the pound was much stronger than the dollar via the currency strength meter. My positions were short at 101.739, 101.661 and 101.532. The first two gave me a neat profit as my target price for each trade was met, while the third one hit my stop loss as I did not close the position when it still was profiting. I expected the dollar to drop further against the Yen but it did not take place.
Lesson learnt, whenever the third position is in profit territory and the other two trades have met their target price, just close it. A small profit no matter how tiny is better than a loss.
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