USD/JPY is giving back substantial ground this morning, weighed down by some pent-up selling by Japanese corporates and renewed sales from Japanese retail. Last week, you’ll recall, Japanese corporates were rumored to have been asked by the Japanese authorities to refrain from hedging while the dollar tried to forge a sustainable rally. Having bounced to 90.75 on Friday, it looks as though Corporates have been given the green light and they are happily booking unexpectedly favorable rates just days after seeing the dollar plunge to its lowest level since 1995.
Traders also report renewed sales by Japanese retail accounts. I’ll not comment on the trading record of that group of traders as matter of decorum.
Support for USD/JPY comes in around the 89.45/50 level on pullbacks near-term. Given the sharp rally last week, we are still quite far from important Fibo support. The lesser used 23.6% retracement of the 84.80/90.75 rally comes in at 89.35. the 38.2% retracement is not seen until 88.48. We trade now at 89.50.
