Japanese Yen: Yen turning corner case builds – Societe Generale
Societe Generale strategists highlight heavy USD/JPY turnover as the pair slid below its 200-day moving average, with leveraged accounts forced to cover shorts.
The Societe Generale strategists have noted a significant shift in the USD/JPY exchange rate, with the pair slipping below its 200-day moving average. This development has forced leveraged accounts to cover their short positions as heavy trading volume has been observed. The strategists argue that potential Bank of Japan (BoJ) tightening and bond repatriation flows ahead of the fiscal year-end could support a more positive outlook for the Japanese Yen.
However, this optimism is contingent on Federal Reserve policy and rate spread dynamics. The USD/JPY pair struggled to surpass the interim hurdle at 160.70/161 during the week and has since seen a sharp pullback. Analysts suggest that the pair might be forming the right shoulder of a head and shoulders pattern, which typically signals a potential downside.
Should the currency rebound, the MA near 160.70/161 could act as a key obstacle. The next critical support level is at the pattern's neckline near 155. A break below this level might initiate a deeper downtrend. An estimated $30 billion was traded yesterday during the down leg from above the 100-day moving average to below the 200-day moving average, accompanied by follow-through selling in Asia overnight.
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