Japanese investors weigh in

The Fed’s hawkish stance at its latest meeting sent investors flocking to the US dollar, with the market rewriting its expectations of when the Fed plans to start tapering asset purchases. But even before the Fed-related drive to USD sent USDJPY through 97.00, investors were selling the yen. Is it a sign of a deeper correction?

Prior to this week, the Japanese were net sellers of foreign assets, in other words they were bringing money back into Japan. Yet, the weakness in the yen this week, at least before the FOMC madness, may suggest that the Japanese are venturing back into the global marketplace.

However, there is a chance the FOMC put an end to this at its latest meeting. By moving forward the market’s expectations of the end of its QE3 programme, the Fed created significantly volatility in the market, which may be enough to increase safe haven flows back into the yen. This possible yen strength will be weighed against possible USD strength on the back of QE3 tapering expectations. Yet, if the market accepts the Fed’s plan to taper asset purchases sooner rather than later, which may reduce market volatility, then the Japanese may start to venture out again.

Support

• 97.60 – 38.2% retracement level from May’s high

• 98.20 – 21day SMA

• 98.80 – 50.0% retracement level from May’s high

Resistance

• 96.90 – 100day SMA

• 96.30

• 94.45 – prior resistance

Source: Forex.com

21.06.2013