Just like we suggested earlier, Japanese benchmark stock index, Nikkei 225, needs to rally to derail Yen from further gaining grounds as S&P 500 rise is clearly not enough. With investors shrugging off fear over global economy and stock markets, Yen has very little to gain from other than broad based weakness in Dollar, which at the moment is not being enough.
Moreover this week, with approaching Good Friday, holiday on Friday, may not be ideal for risk aversion, moreover Yen might get hurt over profit bookings.
Now, Nikkei is at a critical juncture here, and if it succeed in pushing higher 17350 area, further rally could extend the index towards 19300 area, another 2000 points.
In such a case we expect Yen to test key resistance once more which lies around 114 area.
However, our outlook for Yen is bullish, so we would prefer to buy Yen against Dollar, due to general weakness in Dollar.
However some analysts are issuing cautions that Yen strength may hit the limit of Bank of Japan’s (BOJ) patience and there could be direct intervention by the bank. On the flip side, general consensus is, Bank of Japan (BOJ) actions have reached its limit and the actions have so far failed to either boost economy big time or trigger inflation. Today released, PMI data showed Japanese manufacturing n contraction in March as headline read below 50, at 49.1. All industry activity index also declined by -0.9%.
So, the question remains, what can BOJ do further?
As Nikkei has breached above 17000, Yen has moved above 112 per Dollar.
