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Forex Flash: USD/JPY consolidating for three weeks since sharp rally - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that the dollar has been consolidating against the Yen for the past three weeks after rallying sharply since the Japanese election was announced in mid-November 2012, and Abe´s election and policy mix was anticipated.

He adds that the dollar has stalled around 94, which corresponds to a 38.2% retracement of its losses since the financial crisis began in mid-2007. He writes, “In the rally, and the more recent consolidation phase, the 20-day moving average has held dollar dips. It comes in just below 93.00.” He now feels that it is possible that the dollar is also carving out a topping pattern against the Yen, and a break of 92.00 is needed to confirm the pattern which projects towards 90.00. He writes, “However, we suspect that the dollar bulls may try one more time to sustain a push above JPY94.00. We are cautious at these levels and see the appointment of the new BOJ management team as a possible incentive to make that attempt on the dollar's upside.”

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