USD/JPY hit a two-month high of 100.44 today.
The best trade of the past year, at least for trend followers, was the USD/JPY rally from 80.00 to 103.00. The speculative market remains long but in the past six months the pair had done precious little.
That changed in the past week as the pair broke a long-forming wedge.
USDJPY breakout?
Unlike last year with the introduction of Abenomics and Kuroda easing, the latest leg of USD/JPY strength doesn’t have a clear catalyst. The move yesterday benefitted from risk appetite and seemingly mundane comments from Finance Minister Taro Aso.
Certainly every part of the Japanese government wants USD/JPY to strengthen and risk appetite could help. A planned sales tax hike in April could hurt the Japanese economy while a taper on resurrection of US growth could help the other side of the equation.
Overall, I like scaling into USD/JPY longs, especially on a break of the September high of 100.61. What makes the move particularly believable this time is that it’s been coupled with a rally in the Nikkei. Watch for some downward pressure on USD/JPY into the options expiration but that may ultimately prove to be a buying opportunity.