Societe Generale Sees Turning Point for Japanese Yen

Heavy trading activity has been observed in the USD/JPY currency pair as it fell below its 200-day moving average. This led to leveraged accounts being forced to cover their short positions, adding to the selling pressure.

Societe Generale strategists believe that potential Bank of Japan (BoJ) tightening and bond repatriation flows ahead of fiscal year-end could support a more constructive Japanese Yen outlook. However, conviction in this view hinges on Federal Reserve policy and rate spread dynamics.

The pair struggled to overcome the 50-day moving average at 160.70/161 earlier in the week, leading to a sharp pullback. A rebound could be hindered by the presence of a potential head and shoulders pattern, which typically signals downside pressure.

With $30 billion traded yesterday during the down leg in USD/JPY, market participants are awaiting key economic data releases, including the NFP tomorrow and CPI next week, to gain more clarity on the pair's direction. Hawkish comments by BoJ board member Takata also triggered a minor reversal and squeeze up to 157 from the intra-day low of 156.36.