FXstreet.com (Barcelona) - The Yen continues to trade in a world
of its own, courtesy of the ambitious promises to end deflation by
printing unlimited money from Mr. Abe, set to become the next
Japanese PM this Sunday. Today in Asia, the overstretched bearish
tendencies in the battered Yen have worsened to the tune of 25-30
pips on average.
Astonishment to the sharpness of its rise? The radical shift in
language by Mr. Abe has this time many analysts speculating that
the monthly consistency of money printing by the BoJ could be
finally a long term weight for the Yen. Expansion of money
creation, sadly, is a common practice these days, with global
central bank's balance sheets beefed up over $11 trillion since the
GFC.
Disbelief the rise may continue? We had a period from Feb thru
March in which an even sharper rally saw USD/JPY spot rate travel
as high as 84.15 before the pair's revisit to 77.00. With the fresh
memory of the latest upside attempt at levels overhead failing, the
key to imagine USD/JPY legs being durable would be an upside
resolution through 84.15 high, the next key upside barrier going
forward.
What seems hard to imagine is that the vertical rise can be
sustainable past the Sunday's Japanese election, as daily technical
are screaming to take a breather before other longs get interested
to join the Yen bear's train. Even if the results for Mr. Abe are
good enough to bring forward his ultra-easing plans, value to enter
a Yen trade is still seen on pullbacks, thus the danger from 'buy
the rumour sell the fact' kind of reaction post Sunday elections is
still mid-high.
Frustration not to be on board? From an hourly perspective, since
there is little value to be chasing the price higher from current
levels, those traders who have yet to get on board of the USD/JPY
bandwagon, some levels standout as interesting value areas to bid
the pair, depending on the trader's risk profile. Aggressive ones
may try 83.30, the 38.2% fib from breakout point as first support
on shallow retreats, followed by 83.00 round number - more
conservative - ahead of important 82.80.
If an landslide victory from LDP's Mr. Abe provides the leader with
enough power to oblige the Bank of Japan to set a 2% inflation
target by law, thus scrapping out the so called independent role a
central bank should enjoy, that may well be the cause of some long
lasting change in Yen dynamics beyond end of this year, and certain
USD/JPY calls +84.00 may come true.
On the contrary, remember the market is pricing extremely
aggressive easing policies from the BoJ, thus any little setback
that may perturb such expectations, at current overdone levels, can
quickly prompt some flash corrections lower.