In an unusual development, sterling is outperforming today. It rose to a four-day high near $1.4230 on what appears to be mostly modest position adjustment in relatively subdued turnover.The $1.40 area held on repeated tests in the second half of last week. Stops were triggered above $1.4160 forcing latest shorts to cover.The news stream was not particularly helpful was the British Chamber of Commerce warning that the economy slowed in Q1 with the balance of services the poorest in nearly three years.  Meanwhile, UK stocks and bonds are underperforming slightly. 

If sterling has not peaked for the session, the intraday technical readings warn that the high has been approached. The week’s key events for sterling, include tomorrow’s CPI report, and the BOE meeting may not be sufficient to offset the angst over Brexit and the new challenge faced by Prime Minister Cameron over the handling of the family’s tax avoidance minimization actions.   

The dollar fell to new lows against the yen just below JPY107.65. However, there was not follow-through selling, and as North American traders return to their posts, the greenback is pushing back toward the session highs near JPY108.30.Immediate resistance is seen near JPY108.60.  Japan reported a somewhat less steep decline in the volatile machinery orders data.The 9.2% decline in February followed a 15% increase in January.The Bloomberg median estimate was for a 12% decline.  

The 38.2% retracement of the Abe-induced dollar rally against the yen is found near JPY106.80, and the measuring objective of the potential head and shoulders pattern is near JPY107.00. Speculators in the futures market have amassed a record gross long yen position while portfolio investment has mostly flowed out of Japan.  

It is not that the G7 and G20 best practices forbid intervention. That overstates the case.Recall in 2011, afterJapan was hit by the earthquake and tsunami, the G7 did coordinate intervention to weaken the yen.Rather intervention should rarely be used to combat disorderly markets.It should be transparent and in consultation with its partners.   The yen’s strengthening following the adoption of negative interest rates at the end of January is counter-intuitive, but the market does not appear disorderly.