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In terms of USD/JPY we could be on the verge of a major trend reversal our reasoning and logic in the enclosed articles with the key levels of support and resistance to look out for below...

The fall in the JPY has been due to the Bank of Japan being dovish and having an ultra-loose monetary policy while other Central banks have been hawkish and raising rates but this fundamental is changing...

Interest Rate Outlook

“It may be necessary to allow moderately higher JGB yields. The changes in yield curve control can be interpreted as the first steps in this direction. If inflation can eventually be brought back to the 2% target with moderately higher yields, this may end up being JPY positive. Then Yen's yield disadvantage will be less significant (especially if other central banks cut their rates)” (COMMERZBANK)

We can already see Japanese Bonds on the up following US Bonds chart comparing 30-year bond yields below...


The 10 Year bond is also firming...


BoJ Yield Control Policy Ending

“The central bank’s ultra-loose policy is now on a somewhat pre-determined path — towards (if not quite through) the exit door. This view is gaining traction in Tokyo. In the face of decade-high national wage growth, broadening price pressures, and hastened by a dysfunctional bond market, the BoJ’s policy of seeking to cap yields — known as yield curve control — is on its last legs.” (The Financial Times)

Capital Flows 

The above was written a few months ago and is now coming to fruition. Japanese investors have normally sold foreign bonds when the yen falls, when their costs to hedge their foreign currency exposure rose, or when global bond yields were on an uptrend. The Yen is no longer going down and we are near a peak in the global interest rates. The Japanese are the world's largest investor globally and we expect their huge foreign holdings to flow home to Japan in terms of yields going higher but also if we get a move to risk-off which we think is likely.

Note: We are generally bullish on the USD and while we are bearish of USD/JPY our favorite trades are in the crosses check out our related articles for more info...

Technical Analysis 

Our view of the key levels of support and resistance to look out for on the chart below: 


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