For traders involved in financial markets less than 4 years, the break-up of the 100.00 level in USD/JPY surely came as a psychological shock, although it was probably equally puzzling to witness the loss of that magic level back in late 2008 by the more veteran traders.
The general market view is that it appears rather safe to assume, after the velocity of gains above 100.00, that a fresh new cycle above the 100.00 is now developing in the pair. This suggests that yen and U.S. dollars exchanging hands at a 2 digits rate is probably over for quite some time.
Technicals in the chart continue to point north while fundamentals allude to Japan remaining firmly on course to achieve a 2% inflation goal by any means, and by that, it means to use as much stimulatory ammunition as they think best fit.
Further fueling speculators bets against the yen is the latest communique released by the G7 circus, in which it was confirmed once again that Japan had escaped censure from its Western colleagues.
According to Mike Paterson, editor at Forexlive, "the last developments in the G7 should be the green light for further yen selling given that it takes the uncertainty out of the equation but the announcement was hardly a surprise" he said.
While Japan continues not being directly accused as a 'currency manipulator', despite the 30% drop in Yen value since November last year, conversations behind close doors were reportedly quite heated, with a few countries voicing out a closer monitoring over Japan's radical monetary policy shift. U.S. Treasury Secretary Jack Lew had something to say on yen weakness: "We'll keep an eye on that", suggesting that any signs of currency manipulation by Japan will be watched very closely. Lew added that Japan had "growth issues."
Technically speaking, there seems to be broad-based consensus that the yen selling has further legs to go.
According to our chief analyst Valeria Bednarik: "G7 support along with sustained gains above 100.00 had opened doors for a continuation of the bullish trend, and selling interest is nowhere around, supporting overall momentum in the pair."
Once above 102.00, "there's little in the middle up to 103.60, next strong resistance ahead of 105.00" says Valeria, who "expects shallow corrections in between and buyers quickly adding in retracements."
Greg Gibbs, currency strategist at RBS, also supports the view from Valeria, saying he expects "relatively little pull-back from current levels in the high 101s, and a continuation of the rising trend", adding that "while the pace of the upswing may not be as rapid as earlier in the year, we expect it to be persistent."
Nomura strategist are also quite aggressive setting the next yen targets, noting: "We have been arguing that a spike towards 105 in USDJPY was quite likely around the peak flows in May-June, and this scenario now seems to be playing out. During Q2, as asset allocations peak, we think overshooting towards 105 is possible."
In the same line of thinking, Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, said: "The triangle or wedge pattern that has been convincingly broken projects into the JPY104-JPY105 area. Pullbacks toward JPY100.70 will likely be seen as a new buying opportunity."