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Forex Flash: Buy USD/JPY on dips in the near-term, but be warned by headwinds - Rabobank

FXstreet.com (San Francisco) - After rising 665 pips in the last three session from the 92.70 triple bottom area, the USD/JPY reached today the highest level since May 2009 at 99.35. The movement has been fueled by the BoJ aggressive measures to fight the strong yen. Many banks are forecast the USD/JPY to reach the 100.00 this week with the pair ending the year well above the this mark.

The Rabobank's analyst Jane Foley points that "currently the real effective exchange rate of Japan is trading well below the average of the past 20 years. This means the Japanese authorities will now find it difficult to argue that the yen is too expensive." And despite economist and leaders across the world have criticized the measure, the BoJ remains firm in its decision. In this case, Foley states that "the greater the move in the JPY the more likely it is that a discussion about currency wars will be re-ignited. "

Meanwhile, "it appears that while technical resistance in the Y98.90/99.80 area may slow the move down, the yen is still very vulnerable to the enthusiasm that greeted last week’s aggressive BoJ policy action," comments Folwy. Rabobank continues "to favour buying USD/JPY on dips in the near-term, but would warn that JPY losses are likely to be subject to headwinds from a variety of directions which could limit the magnitude of the move."

"The potential for a less robust tone in the USD and a general decline in risk appetite in Asia are not natural conditions for an aggressive rise in USD/JPY," adds the Rabobank analyst. "This suggests it may be more of a struggle for USD/JPY to conquer and hold the 100 barrier than the yen bears currently suggest."

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