USDJPY - Is the Yen soon to be under attack again?

After Japan's recent economic results the BoJ is back in focus, and we're starting to hear a little noise surrounding the Yens recent recovery against the western currencies.  We've seen a good 700point rebound in it from its recent lows, but the question is now, is it sustainable?

Sales tax hikes are due to increase from 5% to 8% by April 2014 in order to tackle the monstrous government deficit that the country is currently in an ageing population (on the 09/08/13 the government debt passed the 1 Quadrillion Yen mark for the first time ever, thats 15 zeros after the 1 to you and me!).  This should really put a dampener on consumer expenditure and with business investment on the decline some people are questioning whether the PM is actually going to follow through with the original plan.

Focus is also back on the Fed over its reduction in its bond buying programme and market expectations are still very much in the sooner rather than later category.  'Septaper', which is what it has been dubbed, will keep the USD well supported over the next couple of months unless there is a dramatic turn around in the US economy.

See previous article 07/08/13 USDJPY we broke through the symmetrical triangle that was forming and has stabilising around the support levels mentioned previously at 96.60.  We are still in a down trend channel despite today's and yesterdays strong sessions and MACD is still in bearish formation, so I would hold off from doing anything quite yet as we need to see a bullish confirmation pattern before entering into a long position yet.  I would place this in the pile of 'Ones to Watch'.



Similar things can be said for the EURJPY,  We still need to hold off before getting too excited for a break on the upside and confirm that the upward move is sustainable.  Given my note yesterday on the 12/08/12 EURUSD, I would expect the USD pairing to see greater upside potential.





Charts sourced from IG Index