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Forex Flash: Jump in USD/JPY unjustifiable; risk of deeper Yen correction - RBS

The reality in the Japanese Yen front, in view of RBS currency strategist Greg Gibbs, "is that not much has actually changed recently, certainly not enough to justify a 15 to 20% jump in USD/JPY."

"There is a risk that current holders of short positions in JPY start to question why they are so bearish once the JPY fall loses momentum. If they are attached to a narrative and momentum, their conviction will be low when the correction comes" Greg says.

Mr. Gibs' preferred strategy for the short term "is to expect a range between 88/95 with a view to buy for the longer term as the relative fundamentals continue to argue for a weaker JPY over the medium term" he notes.

Adding to downside risk, according to Greg, "is the potential for a correction in global risk appetite." Potential trigger points are "weak European economic data and political developments in Italy and Spain and the US fiscal debate come to mind", he says.

Forex: USD/JPY breaks 94.00; Abe talking down the Yen

The Yen continues to be talked down by Japanese politicians, with the latest spike (currently underway) just breaking above 94.00 after Japan's Prime Minister Mr. Abe just said that "buying foreign bonds could be among future option for the BoJ..." As a reminder for readers, the purchase of overseas bonds by Japan is seen as a riskier, unorthodox option to keep expanding the central bank's balance sheet, having negative connotations for the Yen value in the eyes of speculators. After the headline, the USD/JPY recorded its session highest at 94.10.
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Forex: USD/JPY stalls below 94.20 stops

With USD/JPY at 94.11, off fresh session/3-day highs at 94.15, and stops above 94.20, Eamonn Sheridan from ForexLive said, Yen keeps being sold across the board, while Nikkei index gains more than +2.20% for the day above the 11400 points mark. After few days as the strongest currency among majors, up +2% in 3 days, Yen is again on its way to being the weakest one in last 2 days, along with Pound and Euro.
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