The yen has been looking weaker and weaker in the markets, and the advent of it getting weaker seems to be getting closer as tension builds up over the prospect of further stimulus to help reach inflation goals, as well as the result from the cabinet reshuffle headed by Shinzo Abe.
The effects have so far been quite dramatic for the yen, which has broken out of its ranging motion and has since moved upwards in a bullish trend. Technically speaking, it’s likely to form a channel in the long run until it finds some decent resistance on the charts. Resistance levels are likely to be found at 108.120 and 110.727. With support found on the edge of the current channel line as it trends upwards.
It’s not clear how long this trend will last, but what is clear is the need for more stimulus to help the pace of inflation on Japan. The cabinet reshuffle was a smart move in order to enact some more inflation based moves in the economy, as Japan has one of the largest pension funds on the planet, and the buying of riskier assets would help drive the wealth effect in the Japanese economy.
Either way the yen is set for more moves higher, and markets look to be moving just like as Shinzo Abe was coming to office, with the prospect of more market moves higher. I’m currently quite bullish on the USD against the JPY and expect further depreciation in the future and to at least 110.