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Forex pairs in this Article » USD/JPY
FXstreet.com (Athens) – The USD/JPY has been trading mixed since the early trading of the Asian trading session, since as long as Nikkei was falling apart the yen was strengthening enough to drag the pair to fresh 2-month lows; still, the pair is now regaining uptrend momentum due to the fact that the Nikkei turns positive.

USD/JPY hits a 2-month fresh breaking the 200-daily MA, but now heading upwards again

The USD/JPY started the day on the down level amidst the continuing US fiscal standoff. Elaborating on, the USD/JPY broke the crucial resistance as of the 96.71 (200 dma) and printed a new daily 2 month low. Apart from the continuing US fiscal melodrama, one other key reasonthat drove downwards the USD/JPY was the falling Nikkei. Elaborating on traders should always bear in mind that the correlation between the Japanese currency and the Nikkei index is heavily inversely correlated and being more precisely, investors should take upon consideration that the correlation between the Nikkei index and the JPY on the past 20days studies lies approximately at (-0.65%). Thus, investors should not be taken aback by the fact, that as soon as the Nikkei turned positive, the cross gathered again uptrend momentum and now hovering well above the 97.00 area.

Technical Outlook on the USD/JPY

Karen Jones, Head Technical Analyst at Commerzbank suggests that the “USD/JPY remains under pressure and is on course for the 200 day ma at 96.69, the August low at 95.80 and the 95.61 5 month support line. This is expected to hold the downside on the initial test(although we are less convinced that this will hold and provoke reversal).” Our personal aspect of view is that while we agree with Moody's CEO McDaniel opinion expressed through the news wires, saying that "sees very low" chance of US default, we do consider that it may take time to reach to an agreement. Thus, if the agreement is reached at the 12th hour it is plausible that till then, the tensions will not ease. Therefore, a clear daily below the 200-Day SMA (96.71) would bring the cross to the 23.6 Fibonacci expansion, thus to the area as of 96.40-50, while the RSI may limit the downside pressures as it is heading upwards against the support. If the cross manages to break that levels and simultaneously the daily RSI breaks its support as of August low (37), then the pair will probably driven further downwards. Should this occur, our radar will focus on 95.80 (Aug. 2013 low), 95.00 (psychological) and 93.60/80 (convergence of June 2013 low & 38.2% retracement).
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