USD/JPY has been a one-way freight train since early March. The pair has gained for nine-straight weeks and hit 131.34 this week -- the highest since 2002.
Today and yesterday though, there's been a bit of reversal. The pair is down 180 pips today to 128.19.
That's come with a retracement in US yields and the 10-year falling to 2.84% from a high of 3.20%.
There might be a lot going on here. For one, we can't rule out a reversion to the yen's traditional safe haven status as the market struggles to come to terms with inflation and the pain spreads. Secondly, there's a growing sense that Japan will also have to face down inflation.
Last week's high Tokyo CPI numbers may have been the first clue. That's something Barclays highlighted in a note today, saying to buy the yen (sell USD/JPY).
"We believe that the most asymmetric part of the latest yen depreciation is behind us," they wrote in a note today. "Peaking global inflation , increased MoF verbal intervention and the prospect of a BOJ policy change suggest risk is shifting to the downside for USD/JPY."
Barclays recommended selling the pair (reference 129.80) with a target of 122.00 and a stop at 134.00. A standard fibonnacci retracement would get it right into that range.
