USD/JPY: short positions are a priority

Current trend

US dollar remains in the medium term downward tendency against the Japanese yen. In the beginning of April the pair significantly dropped in view of demand for JPY. The interest of investors in yen was caused by the uncertain situation in the economies of the EU and UK and lower demand for USD due to delay in winding up stimulation measures. The fal of the pair was additionally catalyzed by negative releases from the USA: thus, weak labor market, key indexes, retail sales, and inflation data have been published since the beginning of the month. During the current week the pair has been corrected after a significant fall in the narrowing side channel. Special attention should be paid to the data on initial jobless claims and Manufacturing PMI.

Support and resistance

The main outlook is the consolidation of the pair in the current downward channel. By now the pair has reached the border of the downward channel therefore the formation of a downward wave with target at 107.00 is possible. Another scenario includes the consolidation of the pair in a side channel followed by longer correction upwards to the level of 109.85 and then back to local minimums of 108.30, 108.10. Technical indicators support the second scenario: MACD shows rapid fall of the volume of short positions, and Bollinger Bands changed their direction to upward.

Support levels: 108.65, 108.50, 108.30, 108.10, 107.55, 107.00, 106.30.

Resistance levels: 109.85, 110.30, 110.70, 111.00, 111.50, 112.20.

Trading tips

In this situation short positions may be opened from the current level with targets at 108.30 in the short term and 107.00 in the medium term. Stop-loss should be placed on the level of 109.30.