How Far Can the USD/JPY Go?

The US dollar fell to a seven-month low against the Japanese yen this morning following another barrage of weak economic data. Consumer prices fell, foreign inflows decreased, and the University of Michigan consumer confidence survey dropped to the lowest level since August 2009. On FX360.com, I talked incessantly in my daily report about how the data today was going to be weak, and yesterday, I said USD/JPY was going to fall to at least 87. However, now that it has broken below that point, the burning question on everyone’s minds is “How much further can it fall?”

My updated target is at least 85.00—the currency pair’s 14-year low. When USD/JPY reaches that point, expect Bank of Japan officials to cry uncle and attempt to talk down the yen (and up the dollar). That will most likely create some two-way risk in USD/JPY and stem the currency’s slide. Yesterday, Shirakawa already warned that they are watching USD/JPY closely.

Enjoy the chart, and enjoy the trade!

Click to Enlarge