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Watching for dips on rising USD/JPY

The pair is touching new six-year heights after breaking above the January high of 105.43 and pushing above yesterday’s resistance level at 106.1.

USD and Yen notes
Source: Bloomberg

The yen drifted lower on the soft Japanese macroeconomic data yesterday. Q2 GDP released was the worst in nearly five years at -7.2%.

This accelerated the likelihood of more stimulus measures by the Bank of Japan, which had raised the possibility at last month’s Jackson Hole Symposium.

We could get another catalyst with  the round of Japan data out today from the consumer confidence index (1pm SGT).

The market consensus forecast is for an improved reading of 42.3 from July’s 41.5.

There will also be some figures from Machine Tool Orders today (2pm SGT) to give further direction on sentiment.

There was some positive numbers from Japan’s Q4 Manpower Employment Outlook released this morning. It showed an improved print of 18, from the prior quarter’s reading of 16. There wasn’t any significant impact on the currencies, which has been largely range bound in the morning session.

While USD/JPY is on a long-term uptrend, any positive Japanese data could give an excuse for the rally to take a break.

With the RSI indicator above 70 in oversold territory, this suggests a retracement to the next support could be around the corner. The MACD has also dipped under the signal line to suggest some short-term bearishness.

Traders looking for an entry can consider waiting for a USD/JPY to pull back to around the 105.21 area, which was the nearest high based on a monthly chart.

Spot FX USD/JPY
Click to enlarge

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