Japan’s Tankan manufacturing index came in better than expected this morning (4 versus 3), showing that manufacturing conditions are improving. This saw USD/JPY momentarily pop higher, while the Nikkei is relatively flat. The dollar index is solidifying its position above 83.
USD/JPY has been the biggest beneficiary of all this tapering talk and we feel Japan is in prime position for a recovery in the near term. USD/JPY rallied to a high of ¥99.45 on Friday and remains steady above ¥99.
We believe the pair is headed back towards ¥100 in the near term. We will update stops and potential targets for the Nikkei as the week progresses.