“With USDJPY crossing 100 today is now a good time to sell the Yen and buy the Nikkei, or am I too late? Would be interested in your thoughts.”

Eoin Treacy's view

Thank you for this topical question which also crossed my mind as I was conducting my morning click through of global markets. The Bank of Japan’s commitment to shocking the economy out of deflation remains in place and is a major influence on the Yen, Japan’s significant export market as well as domestic inflationary expectations. .

Following an explosive move from early this year, the Dollar had developed a deep over extension relative to the 200-day MA by May and pulled back sharply to close it by June. It has held a progression of higher reaction lows since and ¥100 represents a psychological Rubicon as you point out. The Nikkei-225 also rallied back to test the 15,000 area today. Neither has conclusively broken upwards just yet.

As you will appreciate, the risk of buying at the upper side of the range is that this occasion will be no different from the last three occasions the Index tested this level. Therefore we are forced to consider the possibility that it may yet fall back to test the progression of higher reaction lows, currently near 14,000. While a clear downward dynamic would be required to check momentum, It would be prudent to size positions taking account of the risk of a drawdown.