Even though Japanese traders are back in the market, we have seen little cohesive price action in the Yen crosses. AUD/JPY and GBP/JPY are up today, but currency pairs like EUR/JPY, USD/JPY and NZD/JPY are down.
Aside from the rally in GBP/JPY, the movements in the yen crosses have been limited as the Dow Jones Industrial Average trades up for the 24th trading session out of the past 27. The carry currencies are all holding steady with most of the pairs still consolidating in triangle formations, which indicates that a major breakout is imminent. Coincidently, there are a number of factors brewing that could trigger a breakout. The US House of Representatives? Trade subcommittee will be hosting a hearing on currency manipulation. China and Japan are the most prominent potential violators which mean that any critical comments about excessive undervaluation of the Yuan or Yen could lead to strength in either currency. Like the Dow, the Shanghai stock index has also hit a record high. China may opt to pacify the situation by engineering speculation of potential moves to cool the rally. If you recall, the last time we had similar speculation, the Chinese stock market dropped 9 percent, triggering a wave of selling in the yen crosses and in the Dow.