Analysts at Wells Fargo claim that there are 2 opposing forces influencing the pair USD/JPY. On the one hand, there is the speculative upward pressure on yen due to the anticipation of the repatriation flows. On the other hand, Japanese officials have drawn the line in the sand to prevent further appreciation of the national currency. The specialists believe that this kind of mixed environment for yen is going to prevail for at least several months. The specialists, however, donít think that Japanese currency will once more test the postwar maximums as it did on March 16 when it reached 76.31 yen.

Wells Fargo says that 80 yen mark is certainly a psychological level below which the intervention risk is high. The economists are speaking not so much about the actions of other central banks, but about the efforts of both the Bank of Japan and the countryís Ministry of Finance. Judging from the degree of momentum at the market the pairs USD/JPY and EUR/JPY will be the primary crosses affected by potential intervention, though the Bank of England and the Bank of Canada have also sold yen.

The strategists note that though the amount of the international participation probably isnít very strong, it will send a strong message to investors indicating the high degree of the authoritiesí commitment.

The market has priced in about a 100 basis points interest rates hike over 12 month Ė quite significant pricing in Ė so it can be argued that thereís still some place for Euro to reflect the expectations. The problem is still in the European debt concerns. Wells Fargo believes that some of the euro zoneís indebted nations, especially Portugal, may soon need a bailout.

As for Portugal, April is a very important month in terms of the debtís refinancing. This could be the point where the forex market will come more in line with the fixed income market. Itís necessary to note that Portuguese bond market is still showing a significant amount of investorsí stress. Itís just the forex market that hasnít paid much attention to the euro areaís debt problems so far.

The specialists say that the greenback will be on the defensive due to the hawkish signals from the ECB and the Bank of England until the second round of the QE ends in June. Wells Fargo expects June to be an important threshold for the currency market. The transition from easing to neutral policy is going to be significant itself, even if the Fed doesnít start hiking rates quickly.

Chart. Daily USD/JPY