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JPY Daily News
Yen Weakness Continues
The sell-off in the yen versus the dollar and the euro continued on Friday and may extend further into this week's trading. Talk of a renewal of the carry trade has added momentum behind the yen's recent decline that began after the coordinated intervention by the G7 in the FX markets. Also supporting yen weakness has been a rebound in global equity markets following the selling that occurred after the geopolitical unrest in Libya and the natural disaster in Japan.
A catalyst for further declines in the yen would be higher relative yields. The ECB is expected increase interest rates by 25 bp this week and market watchers will be keying in on potential for further ECB rate hikes. Following last week's hawkish comments by multiple Fed members and a strong non-farm payrolls report, a reevaluation of US monetary policy would continue to keep the yen on its back foot.
USD/JPY resistance is found at last week's high of 54.70, followed by the trend line falling off of the June 2007 high which comes in at 85.40. The September 2009 high of 85.90 may also come into play with a significant resistance level at the May 2010 low at 88. Support is found at the 200-day moving average at 82.90 followed by a retracement objective to 81.50.
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