Usually when the music stops, dealers are very quick to scramble for a chair. In USD/JPY, they’ve been taking their time to an unusual degree.
Last week’s impressive rally saw USD/JPY rally from 92.75 to 98.75. Since topping out on Thursday, price pullbacks have been mild, barely 25% of the week’s rally. Two factors could be at play. One could be Japanese investors are still paring back their long-JPY spec positions. The second could be the notion that the BOJ is quietly supporting USD/JPY in ‘stealthy” fashion, a notion raised by a large German bank last week.
Usually once markets stop going up they retrace with a reasonable degree of dispatch. The usd/jpy consolidation seems a bit more extended than “natural”. Any loss of support between the 96.85/97.00 should see USD/JPY pullback toward 96.30/35, a critical area of support on the short-term charts. From a fundamental perspective, lower US Treasury yields resulting from fresh bear market lows in the equity markets are undermining USD/JPY.
