USD/JPY is a complicated trade fundamentally

By FXstreet.com | July 13, 2014 AAA

FXStreet (Guatemala) - USD/JPY is trading at 101.37, up 0.12% on the day, having posted a daily high at 101.43 and low at 101.32.

USD/JPY remains in its sideways formation at the start of the week which much in the background priced in. It is steady today ahead of Japan releasing the final reading on May industrial production. From last week, the JPY was strengthened on the back of risk aversion and in respect of the greenback, we are reminded by Sean Callow, analyst at Westpac Banking Corporation ABN, that Fed speeches from Lockhart (centrist) and Plosser (hawk) offset each other, the former expecting a rate hike in Q2 2015, the latter expecting it earlier than the market expects. “But SF Fed president Williams was a little more confident than previously, suggesting higher rates could come “a touch earlier”.

USD/JPY technically bearish

Valeria Bednarik, chief analyst at FXStreet explained that the yen maintains its strength against the greenback, with the USD/JPY trading some 50 pips above the year low, contained in a tight range for most of last Friday. “The hourly chart shows 100 SMA with a strong bearish slope crossing below 200 one both well above current price, with indicators aiming slightly higher in positive territory”. However, she noted that in the 4 hours chart, indicators present a mild bearish tone below their midlines, with moving averages also well above current price which keeps the pressure to the downside. “Immediate support stands in the 101.20 level, and if below, the pair will likely extend its slide down to 100.60/70 price zone”.

USD/JPY and political risk

USD/JPY may fall under further pressure in risk aversion with Sunday being the deadline for the US and Iran to strike a nuclear deal. “That presents some degree of political risk for markets, but given that we are already shrugging off open civil war in Iraq and Syria, along with fighting between Gaza and Israel, the likelihood of a major market impact seems low”, as noted by Rabobank analysts.

USD/JPY Levels

Spot is presently trading at 101.39, and next resistance can be seen at 101.39 (Daily Open), 101.40 (Yesterday's High), 101.43 (Daily High), 101.48 (Daily Classic R2) and 101.52 (Weekly Classic PP). Next support to the downside can be found at 101.37 (Daily Classic R1), 101.34 (Hourly 20 EMA), 101.32 (Daily Low), 101.29 (Daily Classic PP) and 101.26 (Monthly Low).

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