FXStreet (Edinburgh) – Recent comments by BoJ’s H.Kuroda prompted a sharp sell-off in the pair to the mid-122.00s, although today’s recovery in the dollar is allowing a rebound to the 123.80 area.
According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, “The intraday Elliott wave count is suggesting that we allow for a retracement to approximately 120.85/80 ahead of recovery– this is the April high and the 55 day ma. We notice the rather large divergence on the weekly chart and for now will revert to neutral medium to longer term. Intraday rallies are indicated to terminate circa 123.50”.
In addition, Strategist Robert Rennie at Westpac noted “Our sense of what he said is that he has been misinterpreted on a real versus nominal basis. Japan’s real effective exchange rate is at lows back to January 1973 while a nominal effective exchange would only be just approaching lows seen in 2007. I see this as an expectation that the ¥ will not continue to be plagued by ongoing deflation and thus his comments are not inconsistent with our buy bias. However, I will be hoping for clarity at next week’s BoJ meeting. As I argued last week, the low end of the range should be 122.50/123”.
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