It has been a great relief for Japanese economy (and its exporters) on JPY unwinding the excessive one-way rally from over 124 to 75.50 (between June 2007 to October 2011); since then recovery to over 110 is great relief. The agenda of BOJ is to force-in oxygen into the system through administration of excess liquidity at zero interest rates. This stance has helped significant recovery in equity/stock market and relief to Japanese exporters through weak JPY. The irony is that despite all these monetary support measures, there is no improvement in macroeconomic fundamentals, which is serious worry! There is nothing to cheer when the relief is from overdose of life-line support and from the extended delay in getting back on feet on its own! What next?
The liquidity (and interest rate) supportive measures will help investors ride the extended bullish momentum on equity and currency markets. The strategy of MARKET PULSE for 2014 is to ride the move from 100/101 to 110 with latest revision of focus to 105-115. As per script, USD/JPY began the second round of intra-2014 rally from 105.18 and has now taken out strong resistance at 110.65.
The next target is at 113.75, above which 2007 high of 124.16 will be pulled into radar.
For now, let us set focus on 110.65-113.75 retaining short term bias into 124 with immediate support at 109.85-110. Be with the chase!
Moses Harding
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