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FXstreet.com (London) - USD/JPY is gaining back some lost ground from 99.40 back towards 100.00

USD/JPY reached a high of 100.20 in European markets yesterday but failed to hold on throughout the rest of the day, before continuing to fall throughout NY and Asia back to support 99.40. The Yen is likely to remain weak after Sundays elections on fiscal stimulus and policy in Japan, which holds true to the 9 month rally in the pair built on the promise of aggressive easing to help stimulate the economy. “So if Japan pursues fiscal stimulus, FX investors will probably sell yen – not on the prospect of impending fiscal doom, but rather because it fits with Prime Minister Abe’s overall reflation strategy. Yen bears also know that if JGB Yields do rise on fiscal concerns, further BoJ easing would likely follow”, Gareth Berry, UBS FX Strategy.

USD/JPY upside challenges

USD/JPY has the 2 month resistance line which is offering resistance at 100.92 and the 101.60/78.6% retracement. This will be proving a challenge to the bulls, while 100.20 proves to be the next hurdle. Thereafter, and while capped by 101.60, the base of the cloud at circa 97.67 could be revisited. The market remains capped and while the pair struggle to cross above 99.80, this forms a descending resistance line from 100.80/90. The base of the cloud will be protecting 96.75/95.40 en route to the recent lows, 93.75 and above 101.60 brings the May highs into focus en rout for 105.00 areas.
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