After several unsuccessful attempts, the dollar has taken advantage of a marked improvement in the US labor market and the new green light from international leaders in the Japanese monetary policy to overcome the level of JPY 100 and even accelerate beyond JPY 102.10, a major threshold.
The G20 and the G7 have both renewed a tacit support to Japan in its fight against deflation, which is considered favorable to global growth, despite the devaluation of the yen caused by massive injections of liquidity of the Japanese central bank (BoJ).
The monetary authority, if it has consistently opted for the status quo during its last meeting after the new measures announced at the beginning of last month. It has also revised upward its prospects for growth and inflation for the fiscal year started April 1st, as for the next two following ones. According to monetary authority, the rising prices are now expected to reach +1.9% in 2015-2016. But despite the public investment increase due to the devastation caused by the earthquake and tsunami of 11 March 2011, the BoJ relies mainly on monetary incentives to achieve its objectives while deflation persists in Japan with a further decline in the index of consumer prices in April (-0.3%).
On the American side, macroeconomics improves and the Dow Jones sets new historical highs. The final tally of weekly unemployment claims, better than expected, has allowed the dollar to cross the psychological threshold of JPY 100, less defended than previous weeks. According to the Wall Street Journal, the Federal Reserve even prepared a strategy of gradual reduction of its asset purchases.
Graphically, prices, however, increased rapidly in recent sessions and we collect all of our gains in anticipation of a new profit taking stage. Even though we never go writer in such bullish configuration, we place a buy order just above our support at 99.80, to target JPY 104.90.