July 28--Dollar/yen touched it's highest level since July 15 before reversing course and pressing lower mid morning Wednesday. The major trend for dollar/yen has been down for months now. The yen is managing to strengthen impressively versus the U.S. dollar, despite weak Japanese economic, growth and rate fundamentals.
A bullish current account surplus in Japan, which is largely an export-driven economy, is a factor supporting yen strength.
KEY LINES IN THE SAND
Looking at the technical chart, the major levels in play currently are initial support at 86.27 and then the November 2009 weekly low at 84.82.
The Bank of Japan (BOJ) has been making noise of late of possibly currency intervention amid the recent yen appreciation.
VOLATILITY AHEAD?
Currency traders should use caution around these key levels--especially the November 2009 low. Be prepared for possible whipsaw and reactionary moves.
LONGER VIEW
Taking a look at a monthly chart of dollar/yen, one sees healthy gains in the yen over the past several years.
From June 2007 to November 2009, the yen strengthened significantly as dollar/yen moved from 124.15 to 84.82.
BOJ ACTION
The BOJ may not be tolerant of much more additional yen strength as it will begin to crimp its exporter's profits.
But, foreign exchange markets and currency market trends have proven in the past to be stronger forces than central banks.
A battle may lie ahead. Be aware.