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Forex: USD/JPY in the midst of a topping process?

The USD/JPY continues its resilience by floating around the 94.00 area, near trend highs. The three drivers keeping the spot rate on such a steady tone may be found on the uneventful G20 statement - puts to bed currency war headlines with no threatening rethoric against Japan - , bolder comments on foreign bond purchasing by Japan's Abe yesterday, and the most obvious of all, long players not wanting to give up what has been one of the most successful trades for many since last Oct 2012 when the pair took off.

Some analysts like FXA partner David Solin still suspects the pair is providing indications of building what he calls a 'complex topping formation' above 94.00; he, however, does not rule out that since every market participant is monitoring the potential head and shoulder pattern develop, "it raises the risk that this ideal scenario does not work out" he said. The logic behind is that the more a pattern is followed by a broad-based audience, the riskier it is that it ends up working in one's favour.

Another analyst making references to the pair is Sean Lee, founder at FXWW, noting that "some heavy sell orders yesterday above 94.00 stalled the bullish momentum." Sean points at the potential topping formation, saying that "if the right shoulder near 94.25 holds, the danger would seem to be that some of the market gets caught long at elevated levels and we could see a push lower to trigger trailing stops..." Lastly, Sean warns that much of the price activity will be subject to "the rhetoric and language coming from the Japanese government" he said.

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