Whilst the US dollar has been in a bearish trend for the last few months, for the Japanese yen sentiment here has been the polar opposite with the yen index rising strongly in a bullish trend, in part driven by yen repatriation flows during March and coupled with a stalling in equity markets as risk on sentiment wavered.
But as always with the yen it is a question of patience, patience and more patience, and patience is generally rewarded with the development of a longer term trend, and this has certainly been the case with the current move higher. The congestion phase here lasted for almost three months, from early January through to early March, as the yen index oscillated between 7,750 to the downside and 8,025 to the upside. However, what was particularly interesting about this phase of price action, was the generally upwards slant of the price action, with the higher highs rising gently but supported with higher lows, also gently rising, thereby suggesting a breakout to the upside in due course. This duly arrive in mid March helped with the twice yearly repatriation of yen on strong buying and supported with a decline in risk on sentiment. Since then the index has climbed steadily taking out the 8,050 area first, before pausing and then breaching the 8,250 region in early April.
Over the last few days we have seen a further pause point develop, but the index remains firmly bullish and indeed should tensions escalate in the South China sea, as with the US dollar, a surge in safe haven buying will send the index firmly higher and on towards the 8,750 price region last seen in November 2016 and where deep and sustained resistance now awaits.
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