USD/JPY treading on thin ice below 105 handle

By FXstreet.com | Updated September 03, 2014 AAA

FXStreet (Guatemala) - USD/JPY is trading at 104.82, down -0.26% on the day, having posted a daily high at 105.33 and low at 104.76.

USD/JPY is walking on thin ice here with the downside fully exposed all the way to 104.30 should the ice break. There has been a great deal of hype of late over the on-going review of the benchmark portfolio shares of public pension funds. In that respect, analysts at TD Securities explained that the currency reaction to GPIF portfolio benchmarks is uncertain. “If financial markets foresee a potential reallocation favoring Japanese equities over foreign assets, it could lead to net capital inflows into Japanese equities – similar to what we observed at the onset of Abenomics – hence leading to a lower USD/JPY.

USD/JPY experiencing altitude sickness

Shorter term, technical factors suggest the rise in USD/JPY may be experiencing "altitude sickness" above 105, just as it did in late 2013 around similar levels. Price signals suggest some risk of USD weakness near-term back to the low 104 area. Below 104.30/40 would suggest a deeper retracement of the August rally to the low 103 zone”.

USD/JPY support and resistance

Support levels: 104.80 104.30 104.00

Resistance levels: 105.45 105.90 106.30

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