10 Aug 2015
USD/JPY: significant price action on 124 handle
FXStreet (Guatemala) - USD/JPY is currently trading at 124.36 with a high of 124.39 and low of 124.20.
USD/JPY posted a new two-month high of 125.06 against the Japanese yen, while offers emerged and sent the major right back down to 124.09 before finally consolidating. The catalyst was the Nonfarm Payrolls, as a miss in expectations exposed the rally in the greenback to urgent profit taking despite the number of 215k being firm enough for economists to predict a Fed hike as soon as September.
Japanese headlines are not making much of a market impact, given the embedded policy of the BoJ and the divergence between them and the Fed that is emerging from a policy of ultra low rates to one that could imply rate hikes in incremental fashion as early as September. Against such a backdrop, USD/JPY has been climbing higher since 8th July lows, gaining four big figures in as many weeks of trading.
Subsequently, analysts at TD Securities explained that they are focused on the 125.00/05 region as the first area of potential resistance to the topside ahead of the 5 June highs at 125.86. "A break above that key threshold may see spot attempt a move toward 130 in the coming weeks if our expectation for a Fed hike in September is verified."
USD/JPY subject to negative surprises
However, they also explained that given the market's growing anticipation that a Fed hike is imminent, however, and with only one more employment report remaining until the September FOMC, the currency markets may be more sensitive to a negative surprise. "More significant support should be seen at 123.80."
Fundamentals or technicals to drive USD/JPY?
For this week, we have industrial production from Japan, but the main focus will be retails sales this week and then the FOMC minutes next week as well as CPI's in the US. However, Valeria Bednarik, chief analyst at FXStreet explained that the failure around the critical figure of 125.00 increases now the risk of a bearish continuation in the pair, particularly if the 124.00 level gives up this Monday. "Governor Kuroda continues to see economic improvement in time, saying that the recent slowdown is temporary. The Governor is still confident inflation will pick up early 2016."
Valeria Bednarik offered a technical snapshot as, "Technically, the 4 hours chart supports some bearish continuation, as the Momentum indicator heads south below the 100 level, whilst the RSI indicator has lost its downward strength, but holds around 44. A strong resistance level comes now at 124.45, which means a recovery above it will deny the downside, and favor another test of the 125.00 figure."
USD/JPY posted a new two-month high of 125.06 against the Japanese yen, while offers emerged and sent the major right back down to 124.09 before finally consolidating. The catalyst was the Nonfarm Payrolls, as a miss in expectations exposed the rally in the greenback to urgent profit taking despite the number of 215k being firm enough for economists to predict a Fed hike as soon as September.
Japanese headlines are not making much of a market impact, given the embedded policy of the BoJ and the divergence between them and the Fed that is emerging from a policy of ultra low rates to one that could imply rate hikes in incremental fashion as early as September. Against such a backdrop, USD/JPY has been climbing higher since 8th July lows, gaining four big figures in as many weeks of trading.
Subsequently, analysts at TD Securities explained that they are focused on the 125.00/05 region as the first area of potential resistance to the topside ahead of the 5 June highs at 125.86. "A break above that key threshold may see spot attempt a move toward 130 in the coming weeks if our expectation for a Fed hike in September is verified."
USD/JPY subject to negative surprises
However, they also explained that given the market's growing anticipation that a Fed hike is imminent, however, and with only one more employment report remaining until the September FOMC, the currency markets may be more sensitive to a negative surprise. "More significant support should be seen at 123.80."
Fundamentals or technicals to drive USD/JPY?
For this week, we have industrial production from Japan, but the main focus will be retails sales this week and then the FOMC minutes next week as well as CPI's in the US. However, Valeria Bednarik, chief analyst at FXStreet explained that the failure around the critical figure of 125.00 increases now the risk of a bearish continuation in the pair, particularly if the 124.00 level gives up this Monday. "Governor Kuroda continues to see economic improvement in time, saying that the recent slowdown is temporary. The Governor is still confident inflation will pick up early 2016."
Valeria Bednarik offered a technical snapshot as, "Technically, the 4 hours chart supports some bearish continuation, as the Momentum indicator heads south below the 100 level, whilst the RSI indicator has lost its downward strength, but holds around 44. A strong resistance level comes now at 124.45, which means a recovery above it will deny the downside, and favor another test of the 125.00 figure."