The pair did see a modest rally to 101.87, largely helped by only mild sanctions against Russia from the EU. However, we’ve now seen sellers come back in to stand at 101.70 (at the time of writing). Trend indicators still favour moves to the downside on the daily chart, with the MACD below zero and stochastics headed sharply lower.
Price action in USD/JPY will largely be pushed around by flows around US equities, with the correlation between the S&P and USD/JPY fairly elevated. Any narrative from Russia today on whether it accepts Crimea as part of Russia will be of interest, although there have been signs that Russia is willing to negotiate.
In Asian trade tomorrow we get Japan’s February trade data and the market expects a further trade deficit. This will not surprise anyone as Japan has been running deficits since the earthquake in 2011, and this will largely remain until Japan restarts its nuclear reactor programs. Still for now the trade deficits should cap rallies in the JPY, and it’s for this reason why it will be tough for the pair to trade under 100.00.
101.19 (the 50% retracement of the October to December rally) seems key support right now and I will need to see a break of this level for the trade to work.