For the past few days we have been looking for the currency pair to break below 117 and having done so 2 days in a row, USD/JPY is starting to look like a bargain. Despite Wednesday’s big drop in retail sales, the tone of the Beige Book tells us that the Federal Reserve is optimistic and on track to raise interest rates this year. Of course, deleveraging poses downside risk to USD/JPY, but the currency pair is entering a value zone and so far 116.30 has held. Negative interest rates in Switzerland and the prospect of Quantitative Easing by the European Central Bank leaves the market looking for alternative safe havens. The Yen is attractive but not nearly as alluring as the dollar because the U.S. economy is actually improving while Japan is struggling. The Fed is one of a select few central banks looking to raise interest rates this year. Regardless of whether they choose to do so in the summer or fall doesn’t matter – the key is that they plan to do so period and that along with the loss of the Franc as a safe haven should make the dollar more attractive. In the long run, we are still looking for USD/JPY to revisit its 121.85 December high.