USD/JPY continues to unwind the run up from before the Japan snap election

A case of buy the rumour, sell the fact? That seems to be the most plausible explanation, with traders also arguably feeling heavily guarded amid intervention risks. Japan prime minister Takaichi solidified her position with the snap election now giving her a powerful mandate to push forward with her fiscal plans.The Takaichi trade remains the biggest fundamental driver of the Japanese yen but so far this week, we’re not seeing traders push that agenda.Instead, a weaker dollar is also helping to keep things calmer on the week. That after a softer US retail sales data yesterday as well as a sharp decline in Treasury yields in the aftermath. 10-year yields in the US are down to 4.14%, well off the highs last week near 4.30%.Looking at USD/JPY, the price action continues to favour sellers in the short-term and that is exemplified by the technical developments as well. The pair is poised for a third straight daily drop, with the latest fall since yesterday taking out the 155.00 level. Adding to that is a drop below the 100-day moving average (red line) today, which kills off the bullish momentum for now.The end-January low near 152.10-15 will be one to watch, with a break there likely to allow for a further retracement towards the 200-day moving average (blue line) and perhaps the 150.00 mark.That being said, I wouldn’t expect dip buyers to be sidelined for too long. There’s no doubt that with the focus staying on the Takaichi trade, buyers will be wary about the snap election result. As such, profit-taking at this time amid worries about actual intervention is definitely a warranted strategic play.But in the bigger picture, there are still concerns surrounding the yen currency itself. Analysts are still eyeing USD/JPY to run up towards 160.00 eventually before Tokyo steps in again with actual intervention.
This article was written by Justin Low at investinglive.com.

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