Currency Analyst since 2010

USD/JPY: outlook for June 27 - July 3

USD/JPY fell to 100.00 mark on the news that Britain voted to leave the European Union. Then in the volatile trading the pair recovered to 103.00 on the risk of currency interventions by Japanese monetary authorities.

The market’s risk aversion declined a bit after British Prime Minister and the Bank of England’s Governor reassured investors saying that the nation’s economy remains fundamentally strong and that central bank is ready to take required steps.

In addition, the biggest central banks in the world, including the Federal Reserve, the Bank of England, the ECB, the SNB and the Bank of Japan have standing swap facilities, an unlimited backstop to exchange currencies in case of market disruption.

Yet, potential for the pair’s recovery should be limited. Capital markets will remain in the situation of uncertainty supporting demand for the yen as a safe haven. US dollar won’t have its own strength against the yen as the Fed won’t be in a hurry to raise interest rates after Brexit. Resistance is provided by the 200-week MA at 106.20 and the downtrend resistance line in the 109.00 area. Support is at 100.75 and 100.00. Japan will allow the pair to go below these levels, only if the decline will be very slow.

Next week Japan will release retail sales figures on Wednesday, industrial production on Thursday and inflation statistics as well as Tankan manufacturing and services indexes on Friday. 

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