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Following on from my potential trade idea yesterday, USD/JPY dipped back below 104 and is currently hanging at around the 103.75 region. The pair had been looking overbought for most of the week and it’s therefore not too much of a surprise to see this pullback. There is still room for traders to look at buying the pullbacks in both USD/JPY and the Nikkei.
The next key support for USD/JPY is in the 103.35 region, which is the 23.6% retracement of the rise from October lows to January highs. For the Nikkei, there is support in the 15,450 region, and I’ll be eyeing this closely today to see if it holds.
Of course, this trade was mainly a play on the raft of economic releases out of Japan tomorrow. Should we see some disappointing numbers, there’s room for yen weakness and Nikkei strength. Out of the US later today we have GDP, unemployment claims and pending home sales. Solid readings could be US-dollar positive and lift USD/JPY in turn.