As USDJPY trounces 104.00, is this based on anything real or is the market getting ahead of itself?
Give or take a few yen, USDJPY has taken itself back to pre-Brexit levels.
USDJPY H4 chart
This move is all about Japan right now and what may come from Abe, and maybe even the BOJ. And that's where I'm having trouble with this move. The expectation is fine but we've seen this market burnt time and time again when reality didn't meet the expectation. I'm wondering if we're getting into that scenario now. If the rally continues that just heaps the pressure on what Abe needs to deliver in the markets eyes.
The move from the NFP low is very strong. It's cracked levels but there's more to be done. 105.50 was level that went back to 2013 and it could be something that's a bit more worthy of consideration than the lower levels that developed after Brexit. The 200 MMA sits 25 pips north of that.
To put the whole situation into context, we don't hit the 38.2 fib of the 125.84 drop until 109.24, so that shows what work needs to be done before we really start to think about a trend change.
Sometimes currencies show strong moves that are just not worth trying to fight but when we hit the stronger levels, like 105.50, that's where we can ask questions, whether it's about fighting a move, or deciding to take some profit. For now, 105.00/50 is where I'd think about a short and also where the market may think that it's grabbed enough on the expectation front, and needs to take a breather.