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Here’s where USD/JPY Should Stop
USD/JPY is on a tear. On an intraday basis, it is up more than 450 points. No one expected this currency pair to have such a strongly positive response to a Trump victory. But with Treasury yields soaring (the 10 year rate breached 2%), the dollar shot higher against all of the major currencies. Instead of mourning, investors are cheering a Trump victory because they think he could be extremely positive for the economy. He ran on a campaign of aggressive spending and this is the first time in 8 years that we could be looking at a healthy fiscal stimulus package. His victory speech was conciliatory and heavily Keynesian – this went a long way in boosting risk appetite and lifting Treasury yields.
Technically USD/JPY is within arms reach of 106 and appears likely to make a run for this level. Beyond that, we have some very important resistance levels. The 200-day SMA and 38.2% Fibonacci retracement of the 2011 to 2015 rally converge around 106.60. Given how quickly and aggressively USD/JPY has rise, we believe that the rally will hit a wall near that level.