Although USD/JPY closed lower last week, the pair maintained a bullish state as Kuroda was formally confirmed as the new BOJ governor along with Iwata and Nakaso as deputy governors. We know Kuroda is an advocated of additional easing and has a strong belief in a reaching an inflation target, so now we have to wait and see whether the BOJ will hold an emergency policy meeting to launch new easing measures as soon as late next week.
The Yen has declined over 20% in the past 4 months as investors bet on Prime Minister Abe following through with his campaign promise of aggressive easing. The appointment of Kuroda is the biggest step so far. Whilst on paper it is spells Yen weakness, the expectation level is so high that if Kuroda disappoints in anyway we could see some Yen strength.
The coming few weeks are very important for the medium term outlook for the Yen. If Kuroda introduces new easing measures USD/JPY will have the support to continue its rise. Any hint that Kuroda may not act immediately and aggressively could se unwinding of longs.
This week the Trade Balance report on Wednesday is the only domestic report. However, Kuroda’s movements and actions will far outweigh any other event for the Yen.
USD/JPY continues to trade in a positive fashion from a technical perspective. Pullbacks to key levels offer high probability trade opportunities as long as the fundamental picture remains geared towards easing of monetary policy.USD/JPY" title="USD/JPY" width="1585" height="734">
•USD/JPY has reversed the longer term downtrend (since 2007). The break of the 85.51 key level has triggered extremely bullish price action as expected.
•Price set another fresh high at 96.56, but has since experienced some profit taking. A break through the highs brings into play the 97.77 key level.
•Expect pull backs to find supp
ort on previous key level as marked on the chart. Below 91.18 and 90.85 could trigger corrective phase.
•Buying on dips (at key levels) is a good plan.
•Bullish bias.