All eyes on the yen ahead of Japan GDP

Trade in the fx space has been quite choppy through Asia, with yen crosses continuing to be the highlight.

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Reports around the sales tax hike and election continue to fly around. The latest reports in the Nikkei newspaper suggest Abe is moving towards a delay of the sales tax hike by around 18 months. Japan’s Finance Minister Amari spoke this morning and admitted there are risks associated with either going ahead with the hike or delaying it. Heading into Monday’s GDP release, which has been pinned as the key release for the sales tax hike decision, positioning is likely to ramp up. Once the G20 wraps up, then Abe will probably be in a better position to comment on the latest speculation.

USD/JPY momentum remains positive

USD/JPY has traded at a fresh cycle high (¥116.20) today and has remained bid through the session. It’s clear traders are gearing up for another leg higher and the fact the pair is significantly overbought hasn’t deterred the bulls. I feel pullbacks will continue to be bought up, particularly with a bit of activity out of the US later today. On the calendar we have retail sales and this will be pivotal, as analysts search for signs that the oil price fall has resulted in a wealth transfer from producers to consumers. A solid retail sales reading out of the US would push the greenback higher and have a net positive effect on USD/JPY. Traders already long should look at trailing stops and I would discourage shorts at the moment. After the fact, we might see a pullback.

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