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USD/JPY could slip back to July lows
The drift lower that has characterised USD/JPY over the year so far continues today, with the currency pair losing its tenuous hold on the 50-day moving average. Weaker US data has certainly put the US dollar on the defensive. A failure to hold above the 102 level could easily see the currency pair slip back in the direction of the July lows.
It is a big week for both US and Japanese data, with Japanese jobless numbers out tomorrow, swiftly followed by Case-Shiller home data. However, it is to the latter half of the week that we turn to see the real impact of news, with ADP numbers and a Federal Reserve meeting on Wednesday and non-farms and US manufacturing purchasing managers’ index on Friday.
Ultimately, the loss of the 200-DMA puts USD/JPY on the defensive and a small turn lower in the daily relative strength index shows that the downside scenario is gaining the upper hand. On the hourly chart the momentum indicators have turned lower, and the short-term bounce from101 that began over a week ago seems to have run its course. We would need a close back through the Friday high above 101.90 to suggest the trend has changed direction, but for the time being I suspect 101 has become the next destination for this pair.