USD/JPY bears seek out support structure in a 50% mean reversion

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  • USD/JPY bears in charge as US dollar fading heads to  50% mean reversion. 
  • Eyes will turn to the Fed next week and US yields will be in the picture as will stocks. 

USD/JPY is trading at 107.92 and flat on a quiet start to the last Asian session of the week.

The price is stuck in a 13-pip range.  

It’s been a solid past few session for the greenback with US yields stabilising from the weekly 10-EMA as well as positive US data ahead of the Federal Reserve next week.

In data, the Initial Jobless Claims were low again for the second week in a row providing a clear sign the US economy is improving.

There were just 547,000 new claims for benefits, well below expectations. 

Meanwhile, the Chicago Fed National Activity Index lifting to 1.71pts from -1.2pts and the Kansas City Fed Manufacturing Activity lifting to 31pts in April from 26pts with the composite index reaching an all-time high.

The Fed will be a key event, especially given the recent switch up in tone from both the Canadian and European central banks this week. 

Meanwhile, on the domestic from, the Japan preliminary PMIs for April arrived with the Manufacturing at 53.3 (prior 52.7) and Services at 48.3 (prior 48.3)

before that, we had the Japan inflation data for March.

National headline Consumer Price Index came in as -0.2% YoY (vs. expected -0.2%)

Meanwhile, Japan finance minister Aso has said that he is discussing support policies for the upcoming State of Emergency

The markets are on alert for the official announcement. The four states at risk are Tokyo, Osaka, and Kyoto
Hyogo.

‘Strong measures will be sought to significantly reduce movement.

Meanwhile, the Bank of Japan Governor Kuroda speaking is from 0225GMT.

USD/JPY technical analysis

It’s really a US dollar story that is negatively correlated to stocks. 

The US stock market was under pressure following news that US president Joe Biden has indicated that he plans to double taxes on capital gains to nearly 40% for the wealthy in order to support those less well off.

DXY shot higher as the benchmarks rolled over from below key daily resistance and record highs. 

However, USD/JPY is still falling as the US dollar heads towards a 50% mean reversion of the move from overnight:

The W-formation is drawing in the bid in the greenback.

USD/JPY has subsequently met resistance at a 38.2% Fibo and bears have eyes on a downside extension to prior resistance structure looking left. 

 

 

 

 

 

 

 

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