FX Update: USD/JPY Looking Increasingly Softer
Saxo Bank | Oct 07, 2013 06:11AM ET
The last time we had covered the USDJPY technicals, the pair was rather rangebound, with no immediate departure from the ranges in sight.
Since this publication, the Bank of Japan (BoJ) has been out with its latest rate decision, whereby the bank chose to keep the current state of monetary stimulus unchanged. While this outcome was broadly as anticipated in terms of the consensus expectations, the USDJPY has since drifted lower finding no ground of further support in terms of the BoJ's policies. In the process, USDJPY has made daily closing below a key support level of 97.43 that we highlighted in our last publication as a potential first technical trigger in altering the technical outlook.
Given this key downside movement in USDJPY, below we provide for an updated technical outlook for the cross with a special emphasis on the downside dynamics.
USDJPY to test 200-day moving average
The close below 97.43 last week opened up for further downside in the weeks to come. The support level has technically confirmed both a closing below a trendline support from the August 2013 lows as well the 97.58 level, which is a 38 percent retracement in the 103.73-93.78 wave. This effectively means that the overall technical picture in USDJPY is trading with a bearish bias.
On the short-term horizon, we look for a test of the 200-day moving average, sitting at 96.99 as of this writing. A potential closing below this level would give scope for additional downside momentum and enable a test of the 96.10-20 support zone, which is the lows from the August 8, along with the 23 percent retracement in that wave. Further out on the downside, a test of the June 2013 lows at 93.78 is likely, if USDJPY indeed manages to close below this 96.10-20 support zone.
On the upside, a daily closing above 99.10-20 is now needed, which would bring the pair back into the daily congestion zone and leave a more neutral stand on the technical outlook. A closing above the 99.10-20 zone could potentially lead to a test of 100.61, the highs from September.
USDJPY on a daily scope
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