HiFX predicting a retracement in Japanese Yen exchange rates

 The Japanese Yen has surged higher today with many factors being seen behind today's Yen surge, including the liquidation of some long term positions in the headline USD-JPY pairing as the key 95.00 barrier was broken.

The primary factor behind this week's selloff in USD/JPY though is investor disappointment as Japanese policy initiatives appear to have stalled.

Chris Towner, director of FX advisory services at foreign currency specialists at HiFX, says foreign exchange market watchers should be prepared for a retracement of the recent move:   

“Over the last nine months we have seen the Nikkei roar higher from levels down at 8500 to trade at 15500 a month ago. Recently though we have

seen an aggressive sell-off in the Nikkei and now that we have retraced 20% there is talk of the Nikkei entering bear territory.

"However, in the bigger picture the Nikkei in the 12k area has only retraced half of its rally and going forward there seems a lot of value in the Nikkei especially now with exporters having been given the opportunity to hedge above 100 in USD/JPY.

“The Japanese yen has been correlating the equity market and given the extreme move we have seen in USD/JPY from 78 up to 103, some form of retracement is expected.

"It is also the case that the more aggressive the move one way, the retracement move can be comparatively aggressive the other way. However, given the aggressive quantitative easing programme in Japan instead of entering bear territory, arguably we are back into value territory.”