Prime Minister Shinzo Abe and the Bank of Japan’s (BoJ) aggressive growth policies, “Abeconomics,” have rocketed the Nikkei index to multi-year highs and the Japanese yen to concurrent lows. As developing economies continue to monetarily ease, Abe is looking to announce a second tier of growth policies in his three-tier program this friday during the G8 summit in Northern Ireland. The second tier strategy is looking to target a specific amount of investment capital for the private sector given the next three years.
This should continue the bullish trend on yen pairs over the long-term. With the weakening yen and continued strength in the U.S. dollar, USDJPY finally broke the longtime psychological 100 level – after several failed attempts – and currently sits at 102. 29 (as of writing this article). In the posted 5-year chart, USDJPY sits at an interesting place. Minor resistance can be located at 102.4 as two daily candles posted a high of 102.41; however if price action can convincing break this resistance pocket, USDJPY will test the 78.6% of the 110.65 Fibonacci retracement at 103.14.
Bucky Hellwig, senior vice president at BB&T Wealth Management, said “the developed economies of the world are all easing aggressively, the money is looking for a home and it’s ending up in the stock markets.” This may prove to become also bullish for USDJPY as the U.S. dollar has been tracking the Standard and Poor’s Index rather closely. If the markets continue to ignore the fundamental risks in the global market condition, we can see USDJPY at 106 by the end of the year if not sooner. Positions can be added to with pullbacks with nearest support at 102.02 and 101.61.