Dollar Yen probes highs
Dollar/Yen (USDJPY) is once again well-supported and is currently hovering around weak-ish resistance at 112.15/20. Even if this gives way and the market manages to close above this level, there is stiffer resistance just a little bit higher at 112.75/80 that carries the weight of a 6 month descending trendline. The rise in USDJPY has been mixed to say the least, but it has managed to claw its way up 5 yen, although the fact that it’s taken over 3 months gives some indication of the size of the task at hand. In this context, we’d be quite surprised to see a sudden burst of momentum powering this product up to 115 anytime soon, although stranger things have happened. On balance we think a test of the initial resistance is likely, and if it can close higher then a test of the 112.75 looks on the cards. However we do not think there is enough evidence of the momentum that might be required to successfully penetrate that level, and at this stage would be looking to sell into any rallies, as recent history suggests the existing patterns will be repeated. Having said that, Golden Week – the series of Japanese bank holidays that start on April 29th - will remove significant liquidity from the domestic markets that may distort market movements.