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21 May 2013
Flash: USD/JPY, break through 103.5 allows 105/105.50 - JPMorgan
FXstreet.com (Barcelona) - The current pace of appreciation in USD/JPY should have its days numbered, says JP Morgan FX currency analyst Tohru Sasak, who believes that softening US data will temper speculation on QE tapering.
Moreover, JPMorgan now sees a shift in focus in the perception of the market towards Japan: "With the BoJ now in wait-and-see mode after laying out everything necessary (in their eyes) to achieve 2% inflation in 2 years, focus of Abenomics is now shifting to the government’s 'growth strategy'" the bank notes.
Technically, "the medium term technical setup for JPY remains bearish" Tohru said, although after the test of 103+ last week, "some pause from here is likely as short term momentum studies are still overbought" the analyst said.
"Corrective retracements are viewed as buying opportunities particularly given the renewed bullish setup for the USD. Support at the 100/99.45 area will now be key maintaining the short term upside bias."
"More importantly, a violation of the 97 area, near the early-May low would confirm a bearish shift and extension into the 94/92 zone. Note this is the alternate scenario. Instead, upside breaks through the 103.50 zone should allow for a closer test of the 105/105.50 area which includes the 61.8% retracement of the decline from the 2007 cycle high" Tohru added.
Moreover, JPMorgan now sees a shift in focus in the perception of the market towards Japan: "With the BoJ now in wait-and-see mode after laying out everything necessary (in their eyes) to achieve 2% inflation in 2 years, focus of Abenomics is now shifting to the government’s 'growth strategy'" the bank notes.
Technically, "the medium term technical setup for JPY remains bearish" Tohru said, although after the test of 103+ last week, "some pause from here is likely as short term momentum studies are still overbought" the analyst said.
"Corrective retracements are viewed as buying opportunities particularly given the renewed bullish setup for the USD. Support at the 100/99.45 area will now be key maintaining the short term upside bias."
"More importantly, a violation of the 97 area, near the early-May low would confirm a bearish shift and extension into the 94/92 zone. Note this is the alternate scenario. Instead, upside breaks through the 103.50 zone should allow for a closer test of the 105/105.50 area which includes the 61.8% retracement of the decline from the 2007 cycle high" Tohru added.