FxWirePro: Buy yen targeting 108.5 per dollar

While the monetary policy divergence between the Bank of Japan (BoJ) and the U.S. Federal Reserve remains a major bearish factor for the yen, we expect the ongoing geopolitical crisis in the Middle East, Korean Peninsula, and political crisis in Germany would act as a bullish factor for the yen. Yen has strengthened steadily after weakening to as low as 114.8 per dollar by early November. The area has acted as a support for the yen since April this year and so far, the bears have failed thrice in trying to break the support. The Asian safe haven is currently trading at 112 per dollar.

The chart shows that the price action has been forming a narrowing wedge since August 2016, and a breakout looks imminent. Our calculations show that the bulls are looking to push yen to as high as 108.5 per dollar, which would be very close to the floor of the wedge.

Stop loss for this trade should be maintained around 114.8 per dollar, the recent peak of early November.