A Quick Update on USD/JPY

USDJPY Daily 010813Good Morning, Friends. On Tuesday, I discussed potential rewards and risks in USD/JPY, suggesting that long positions could be established above 97.50, looking to an initial profit target of 98.40 or so. Support held – barely, as the low has been 97.58 – but the pair has now broken higher, helped by a stronger than expected Chinese Purchasing Managers’ Index (50.3 for July versus 50.1 in June). The high has been 98.85; as I hunt and peck, 98.64 is the price. 

It would be nice to be able to point to nothing but good times ahead, but the daily chart indicates a good deal of congestion between 99 and 100; this area may take some time to work through. I would be more inclined to take profits on at least part of the position, reloading on dips while continuing to keep an eye on 97.50. A breach of the lower level would suggest a change in tone, and perhaps trend. The next specific resistance level appears to come in between 99.00 and 99.20. 

We’ll see how this plays out following the European Central Bank’s press conference. One way for USD/JPY to break through resistance would be for EUR/JPY to have a significant upside move, which could occur if signs of a Eurozone economic recovery become more apparent. A weaker Yen versus the Euro is likely to lead to a weaker Yen against the Dollar. 

Best of luck today. 


About the Author kevin


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