USD/JPY: the trend depends on the fundamental data

Current trend

The attractiveness of the Japanese currency for investors is growing again in view of further fall of USD and general tendencies in the financial market. The main catalysts of the pair are two factors: a negative economic tendency in the USA and the transfer of investments to less risky assets, including yen. Thus, in the middle of July investors started to feel interested in the Japanese currency again which made the pair move downward and lose 450 points in less than one month. By now the pair has almost reached the lower border of a wide long-term upward channel 109.55, and volatility is slightly decreasing. An additional catalyst of growth of the Japanese yen was recently positive data on the main sectors of economy, such as labor market and construction sector. The fundamental background in USD remains negative but keeps putting pressure on the US currency. Special attention today should be paid to the unemployment rate and non-farm payrolls.

Support and resistance

Weak labor market data may be an additional catalyst for the reduction of the pair to the local minimum of mid-June (109.00). In the short-term the pair has a potential to move to local maximums at 109.00, 108.15 after which the demand for oversold USD is expected to grow moving the pair to lateral consolidation stage. Technical indicators continue to show a sell signal: MACD keeps high volumes of short positions, and Bollinger Bands are directed downwards.

Support levels: 109.55, 109.00, 108.15, 107.70, 107.00, 106.10, 105.50.

Resistance levels: 110.20, 110.75, 111.25, 112.00, 112.40, 113.45, 114.50.

Trading tips

In the short term short positions may be opened with target at 109.00, 108.15. After reaching these levels the pair is expected to reverse. Stop-loss may be placed at 110.60.