After having come very close to the 100 peak, this week the USD lost some ground to the JPY trading close to the 98 level. We believe that the next target is obviously the breaking out of the 100 line. On the one hand we have updates from BOJ governor Kuroda who said that the 2% inflation target could be realized under two years and gives no sign of wanting to slow down monetary easing. On the other hand, even though this week has seen some weak data coming from the US, possibly the effects of a payroll tax increase and concerns over federal budget cuts, we have reason to believe that these issues will prove temporary. Moreover, this week hasn’t been great concerning equity and looks like traders sold off equities turning to the USD, bringing the dollar index back to the 82.4-82.6 area.
We suggest to take position in the 99.200 area and sell in case the pair drops down to 97.800 level.