The US dollar has plunged against the Japanese yen as suddenly, an interest rate of possibly 1% in Japan is sending everybody running for the exits. That being said, sooner or later the interest rate differential does come back into play as we’ve been repricing the carry trade. Ultimately, this is a market that I think is at a very interesting point that could define the next 6 months. There is a lot of support just below the 150 yen level, so I wouldn’t be shorting into it.
I don’t really see a reason to buy it yet either, although I would anticipate that sooner or later things do turn around. But as traders continue to pretend that the Bank of Japan can suddenly become very tight, we have a situation where the yen will continue to strengthen, or perhaps, maybe the better way to put this is, people are closing out long positions in this pair. I’d sit pat on this one.
