The continued downward drift in USD/JPY has been largely a result of benign U.S. bond yields, sluggish U.S. economic growth and a general home bias by Japanese investors. Considering the technical and fundamental outlook ahead, this pattern is unlikely to change any time soon.
USD/JPY is the only dollar-based currency pair to have traded below its medium- and long-term moving averages for over 95% of the time since stocks peaked in 2007. Not even the raging commodity pairs of AUD/USD or NZD/USD have attained that feat, as these had sustained rapid declines during the 2007-08 crises when risk aversion assaulted risk assets and commodity currencies to the benefit of the safer USD and JPY.
"Under the radar" (above) shows the pair remained below its 100-week moving average throughout the financial crisis and beyond (between August 2007 and June 2011), while trading below its 55-week moving average during the same period, with the exception of a mere four weeks. USD/JPY’s inability to rebound above both moving averages has so far lasted 201 weeks as of mid-June. Prior cycles when USD/JPY had spent a similarly extended duration below the 55- and 100-week moving averages were in: October 2005-June 2005 (139 weeks); September 1990-September 1995 (263 weeks); and June 1985-March 1989 (195 weeks). Each of those three cycles ended with U.S. interest rate hikes, more specifically, when the tightening campaign was in its later stages.