The weak Yen trend continued last week as USD/JPY broke the 89.00 handle for the first time since April 2011, whilst the Yen crosses including the EUR/JPY and AUD/JPY also broke out to fresh highs.
Yen weakness appeared to come to a halt in early week trade as Abe’s new LDP government battled with the BOJ over monetary policy. The Yen actually gained as the new government failed to officially tie the BOJ to a new 2% inflation target via an official agreement. However, the news that the BOJ will add another round of stimulus at their upcoming meeting, as well as informally targeting a 2% inflation target was enough to send USD/JPY higher.
Japanese Prime Minister looks to be fulfilling his promise of stimulus with the potential new 20 trillion Yen package with the objective of kick starting the economy and adding jobs set to be announced at the next BOJ meeting. As a result the Yen’s weakness looks set to continue.
This week the data cupboard is void any top tier releases, so updates from the BOJ and government will determine the near term direction of the Yen. However, the Yen is looking to be in the process of reversing the massive gains it has experienced over the past 4 years.
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- USD/JPY is in the process of reversing the longer term downtrend. The break of the 85.51 key level has triggered extremely bulish price action as expected.
- A fresh higher high has been set on the weekly chart, this is bullish.
- Major Resistance can be found at 92.30 key level.
- Expect pull backs to find support on previous key level as marked on the chart.
Bullish Bias