Yen’s rally run out of steam - Rabobank

Piotr Matys, EM FX Strategist at Rabobank, suggests that the Japanese shares posted strong gains with the Nikkei up 1.13% after the yen’s rally run out of steam following the longest stream of daily gains so far this year.

Key Quotes

“It seems that the JPY’s bulls, who further increased their bets against the US dollar to 98,130 contracts in the week ending April 5 according to the weekly data provided by Commodity Futures Trading Commission, decided to take some profits after the currency appreciated to the highest level since October 2014.

Indeed, technical momentum indicators imply that USD/JPY has reached an oversold territory with the RSI falling below the key 30 threshold. On the last two occasions when the RSI was this low (in early January and in the middle of February), USD/JPY managed to trim its losses.

In other words, there is a risk of a corrective rebound in USD/JPY with stronger than expected US data scheduled this week as a potential trigger. That said, USD/JPY would have to rally beyond the key 111~ pivot (daily lows in February and in the middle of March) to expect a sustainable recovery.”