Japanese repatriation occurred during the months leading up to the fiscal half year-end in September and fiscal year-end in March. Repatriation is when Japanese companies bring back overseas earnings to book as profits. And those fund flows typically support the Japanese currency, as companies sell other currencies and buy yen.
UBS AG, the world’s second-largest currency trader, said in a recent report that tax breaks initiated by Japan last year to foster the nation’s economic recovery could lead to “larger than usual” repatriation of overseas earnings.
According to Tohru Sasaki, chief currency strategist in Tokyo at JPMorgan Chase & Co. that this year Japanese companies may repatriate as much as 1.5 trillion yen ($16.7 billion) of overseas profit in March.
That was the main news that has been thrown about in every slight weakness in yen pairs. Looking at EURJPY chart, the pair has moved against the repatriation plays. It has showing strength since February 25 with price moving upward with higher high and higher low. Currently the pair is making an effort to break through the 125.00 level. This will be the second effort by the pair to penetrate the 125.00 since it break the level from above in early February.
Technically, the pair is currently overbought and I expected a correction at about 125.00. A deep correction with a small rebound will create a MACD divergence that will indicate a change in trend.
