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Currency Analyst since 2010

USD/JPY: breakthrough is coming

Elizaveta Belugina

On Monday USD/JPY fell below the 100-day MA and spent the rest of the week below this line. Although the bulls probably want to see some moves up, the pair lacks drivers for growth. The tone of the US Federal Reserve was very balanced. The markets worry about the recent stream of weak data and don’t expect the rate hike in June. The Bank of Japan has also left its policy unchanged refraining from additional monetary stimulus. Although Japanese regulator cut inflation forecast for this fiscal year, it wasn’t by much. As a result, nothing provoked big moves of the market.

USD/JPY is trapped between 119.30 and 118.50. Technically we see several patterns on the chart: 2 descending triangles – one smaller with resistance drawn through April highs and one bigger with resistance connecting March and April maximums. As for support area, it’s the same for 2: in the 118.50/30 area. The fall below this zone will cause a decline to 117.20/00 – the bottom of the 2-months descending channel and previous lows. Resistance is at 119.75 and 120.00.

Japanese economic calendar is almost empty. The nation’s banks will be closed in the first 3 days of the week because of the various holidays. On Thursday there will be some comments from the Bank of Japan, but the real market mover will be the US data releases, especially labor market figures on Wednesday and Friday.

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