FXstreet.com (Barcelona) -The USD/JPY is opening the week on a
strong note, up 30 pips from the Friday close at 99.83 last. The
pair was well bid late last week after the G20 refrained from
making any negative remarks towards Japan regarding recent
aggressive QE policy. The Bank of Japan will be releasing its
latest interest rate decision and outlook report later this week on
April 26th at 3:00GMT.
The last time the pair traded above the 100.00 level was back in
April 2009. According to Sean Lee at FXWW, "The Yen is again the
focal point of interest in the FX market after the G20 failed to
make any mention of Japanese policy toward its currency. USD/JPY is
again challenging the physical and psychological barrier at 100.00
whilst some of the other crosses are also approaching important
resistance levels. There is nothing of note on the economic
calendar so we will rely on flows for market movement."
He went on to add "There is still some heavy barrier protection
reported ahead of 100.00 in USD/JPY and with real-money offers also
reported, it will be no easy matter for the bulls to crash through
this barrier. IMM positioning reports also show the Yen shorts have
increased yet again and that might also encourage some profit
taking ahead of a big level."
Some analysts are looking at previous correlations for hints at the
future direction of the pair. According to Kathy Lien of BK Asset
Management, "Since November, USD/JPY enjoyed a nice steady rally
that was supported by Shinzo Abe's promise of aggressive monetary
easing AND rising U.S. bond yields. During this time, stronger U.S.
economic data and talk of tapering asset purchases boosted the
dollar and Treasury yields. Now, the Japanese have delivered on
easing, but U.S. yields have plunged and as a result, one side of
the equation was breaking down, capping the rally in USD/JPY".
She went on to add, "The turn in U.S. yields began in March, but
the selling accelerated after a series of U.S. economic
disappointments led investors to question the Federal Reserve's
ability to reduce stimulus by varying asset purchases. Even Fed
officials are divided on what to make of recent reports. Some
policymakers feel that the data is worrisome while others think the
pull back is temporary. Either way, in order for USD/JPY to
recover, we need U.S. yields to stop falling and start rising."
From a technical perspective, the trend on the longer term time
frames (daily/weekly) remains strong with further upside looking
like a good possibility. According to Val Bednarik of FXStreet.com,
"The USD/JPY left a small gap around 99.50, surging again near the
100.00 key level. She went on to add, "sentiment continues to be
bullish for the pair, and retracements are expected to remain
limited and be taken as buying opportunities by investors. The
level has been prove strong in the past, and a large number of
stops then should gather above: if triggered, the 102.00 level is
then exposed for the upcoming sessions."
The resilience of the USD/JPY to finish sharply higher last week
even as equities and commodities were sold was impressive. If
economic data surprises to the upside this week, it would not be
surprising to see the pair have another solid showing as Yen carry
trades are re-established with increasing risk appetite.