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USD/JPY: growth ahead (video)

    By Kira Iukhtenko, FBS analyst

Hawkish US policy minutes and strong data became a long-awaited bullish driver for USD/JPY. Hungry buyers pushed the pair up from 102.30 to 104.00. Let’s try to understand, what’s going on in Japan these days.

Weak Japan economic data are raising market skepticism about how effective the Abe economic reforms are. The most troubling question for the currency market is: Will Abe achieve his 2% inflation target after a sales tax increase derailed growth? Next week the Japanese inflation data will take the central stage. 

In our view, downbeat Japan data alone wouldn’t be enough to make USD/JPY rocket. However, the increasing Fed tightening expectations combined with Japan weakness makes the USD/JPY prospects look bullish.

The technical picture also points to further growth. A fix above the 104.00/15 area will open the way to our next target at 105.60. Next bullish targets lie at 106.60, 107.00 and in the 110 area. In case if US data disappoint, we concede a correction. However, the 101.50 support will limit the yen strength. 

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