The Flying Yen

Well yesterday saw the Yen take on the US Dollar, which was a theme for most major currencies too. The pair moved to the bottom of the recent daily range.

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The talk from Kuroda was cool, calm and collected while the uncertainty in the FOMC seems to have starved the US Dollar of any power. A general risk-off feel yesterday seemed to take no mercy on the Greenback too. Once the barrier option at 103 was broken the stops that had built up after a long period of range trading plus speculators taking profits (from the March highs) gave the move momentum that led to a day long snowball effect. The effect was only halted in the evening by the daily support trendline.

There is a lot of potential downside with stops below 101.50. However, the certainty in BoJ policy is attractive but it is a policy that should weaken the Yen against the US Dollar given the Fed’s current line on tapering. We are favouring a retracement from here but all eyes on the Ukraine as, despite what seems a lack of news coverage compared to the recent violence, the Russian policy here could be far more politically troublesome.