MARKET TALK: Good Reason To Think USD/JPY Won't Head South -BNYM

BNYM sees reason to believe USD/JPY won't head south after breaking through its 200-day moving average for the first time since April last year. "There are certainly good reasons to believe the pair's current spike will not be subject to the same gravitational forces that brought the pair swiftly back down to earth post-MOF intervention in August and October," says the bank. "Since 2003, when Japanese investors embarked on a sustained, offshore buying spree, there has been a staggering 90% correlation between USD/JPY and the two year yield spread between U.S. and Japanese government paper," it adds. It just so happens that the current USD/JPY revival coincided with a 10bps widening in the spread at the end of January. USD/JPY trades at 78.73.