Yen Strength Temporary In Nature

Includes: FXY, UDN, UUP
by: FXstreet

The Japanese yen has started the trading week on a positive note against its American counterpart, dragging USD/JPY to the peripheral boundaries of 87.60 - post NFP figures - after surpassing briefly 88.40 last Thursday. However, according to the research team at TD Securities, today's move would defer to a logical profit taking session, leaving the main bearish trend intact as long as the cross keeps trading above the region at 87.30/40

… BoJ meeting on sight

The BoJ will hold its monetary policy meeting on January 21-22, and it is vox populi that the central bank would announce a new inflation target of 2%, following the new PM S.Abe's 'suggestion', in order to finally start curbing the entrenched deflation that has been hammering the economy for a couple of decades. In addition, the bank commanded by M.Shirakawa would announce another round of stimulus to hamper any attempt of yen strength and mainly to support the new inflation target. This cocktail of components would be supportive of a weaker yen (USD/JPY upside), and it may give S.Abe and the LDP party what any other Japanese politician lacked these past years when comes to economics: credibility.

In light of today's JPY recovery, expert Karen Jones at Commerzbank explains, "USD/JPY maintained upside pressure all of last week and is fast approaching major resistance - namely 89.30 - its 30 year downtrend. This is major resistance for the market and we would expect to see some profit taking and a temporary halt in the bull move ahead of a move to 93.32 - the measurement higher of the triangle".

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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