USD/JPY: picture gets worse
In line with our expectations USD/JPY met resistance at 120.50. The advance of the US dollar was constrained by weaker US data. For now dollar/yen is finding itself in range between 121.00 and 118.00. The pair lacks drivers for a breakthrough to the upside. On the contrary, with weak NFP bearish pressure on USD has increased.
The Bank of Japan will meet on Wednesday. We expect no changes in the policy of the regulator. This adds to the neutral/bearish view of USD/JPY. Tankan manufacturing survey showed that inflation expectations among Japanese companies have slightly weakened. Still that may not be enough for further monetary easing at the beginning of April.
Technically there’s scope for the downside in the pair. The pair may be forming a double top on the weekly chart with neckline at 117.00/116.85 area. American currency is supported by 100-day MA and the Ichimoku Cloud at 118.90/30. Still daily Cloud has narrowed and gave other bearish signals. USD should stay above these two moving averages to remain constructive in the near-term. Below the decline will accelerate to 117.00 and 115.85.
Resistance is still in the 120.50/80 area. A close above here is needed to lead the prices to this year’s high at 122.00.