- USD/JPY is on thin ice testing the bull’s commitments at 112 the figure again in mounting pressures whereby bears will be looking for a break below the recent 111.88 lows and 28th August highs turned support level.
- Currently, USD/JPY is trading at 112.06 having printed a low of 112.04 from a high of 112.24.
Despite Friday’s bounce in US stocks and risk in general, USD/JPY is starting the week on the back foot in Tokyo and reestablishing its southerly trajectory after its worst week since February last week. Risk is elevated on a geopolitical front with Brexit, Italy and trade disputes between the US and China with a sudden twist of investor concerns over the prospects of higher interest rates.
The yuan is a dominating factor as well, and its recent comeback was swallowed up by the bears on Friday, pushing it back into the ascending channel vs the greenback which remains underpinned with respect tot he JP/US spread – (On Friday, the US benchmark yield for the 10-year Treasury note settled at 3.16% after peaking mid-week at 3.26%).
For the week ahead, traders will look towards the US calendar for further evidence of a stronger US economy with key data in retail sales, JOLTS, IP and housing stats with the FOMC minutes may throw up a catalyst also after the Committee raised the federal funds target range 25bp to 2.00-2.25% in September, the third hike of 2018.
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USD/JPY levels
Valeria Bednarik, Chief Analysts at FXStreet, noted that the pair trades now over 200 pips below the yearly high reached at the beginning of the month:
“In the daily chart, is close to its 100 DMA, which lost directional strength and currently stands at 111.50, offering quite a relevant psychological support for the upcoming sessions. The technical indicators have stalled their downward moves well into negative territory, now attempting modest recoveries. The pair has spent the last two trading days struggling but failing to overcome the 23.6% retracement of the latest daily decline around 112.45, an immediate resistance. Shorter term, and according to the 4 hours chart, the upward potential seems limited, as the pair is developing below its 100 and 200 SMA, while technical indicators bounced from oversold readings, but remain in negative levels.”
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