USD/JPY: 102 New Footing For Bulls

USD/JPY broke 102 yesterday during U.S. trading hours. The USD was again the main driver as the Greenback gained strength on the back of higher S&P 500 prices. However, price did not manage to move beyond the 50 pips of the 102.0 ceiling, but nonetheless it should be said that it is a good days for the bulls, as bulls managed to pull away from the Kumo and form a bullish Kumo Twist in the process of breaking 102.

Hourly Chart
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The pullback that was experienced early Asian hours only served to bring price slightly above 102 instead of testing it convincingly, suggesting that overall bullish sentiment is still strong. Stochastic curves are also flattening, which is the early sign of a potential interim trough forming. This adds credence to the scenario where price will be able to push higher from here and potentially give 102.5 a good test this time round.

Daily Chart
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Not much to be said from the bullish chart, just that bull trend is continuing to be strong. Stochastic readings appear to be peaking but that is not very helpful as counter trend signals tended not to be reliable during a strong trend -- and current price action and fundamentals definitely point to a strong up trend.

However there are some concerns to be had -- JGB yields are steadily increasing despite BoJ’s purchasing efforts. This is directly opposite of what the BoJ wants and places doubt on the effectiveness of Abenomics on the market. In fact, the “better” economic data that has come out recently seems to point to weak JPY as the biggest reason why everything is improving, with important fundamentals such as consumer consumption and industrial production figures still shrinking. As such, if bond yields continue to climb higher, the goodwill speculators have been lending to BoJ will evaporate quickly, and potentially pull USD/JPY back below 100 sharply if negativity toward Japan creeps in.