The USD/JPY had another negative week as the bearish trend remained firmly in place for the pair. In addition, the BREXIT volatility spilled over onto the pair during Friday’s session which saw capital exiting the greenback and seeking a safe haven in the yen. Also, the stronger than expected JPY CSPI result of 0.2% also added to yen long positions. Subsequently, the pair finished the week well down around the 102.19 mark. Given the strong volatility of late, it is salient to take a look at the pair’s prospects moving forward.
Early last week saw the USD/JPY continued to move lower as the pair reacted to both the overall bearish trend as well as the BREXIT volatility. The BREXIT result saw capital flooding out of the dollar and into yen long positions as it sought a safe haven from the markets uncertainty. Subsequently, the pair tumbled to breach the key 100.00 level before catching a bid back up to close the week down at 102.19. In addition, the Japanese CSPI result also proved strong at 0.2% y/y which certainly added to the Yen appreciation.
Moving forward, the pair is likely to remain relatively bearish in the week ahead as there appears to be little end in sight to its current slide. However, keep a close watch on the US Unemployment Claims data, due on Friday, as a strong result could see the pair climb back towards the 104.00 handle. In addition, the Japanese CPI data is due out this week and will also be watched closely for any signs of rising inflation expectations.
From a technical perspective, the pair remains largely under the grips of a long run bearish trend line which is still in progress and targeting the 100.70 level. However, the RSI Oscillator is now strongly oversold and may predispose the pair to a small pullback in the coming days. On the upside, resistance at 106.75 is still strongly in place which suggests that the bearish move is the most likely one. Support is currently in place for the pair at 101.52, and 100.70. Resistance exists on the upside at 106.38, 110.16, and 111.90.
Ultimately, don’t make too much of the pair’s current bearish predisposition as the Bank of Japan could very well spoil any sharp moves below the key 100.00 handle. However, the pressure is building and the pair will need to either pullback sharply or plunge lower in the coming days whether the central bank is a party to the action or not.