Forex snapshot

As risk appetite returns, the dollar has risen against the yen, and while for the moment it is unable to make progress against the Swiss franc, the uptrend remains in place.

US dollar and Japanese Yen notes
Source: Bloomberg

USD/JPY eyes ¥103

The move back above the 200-day moving average in USD/JPY seems to confirm the idea that this currency pair is minded to hit ¥103 once again, a major hurdle since the beginning of May.

Any close above this area would put ¥104 back in focus, and with the Bank of Japan probably facing some more declining economic growth the advantage still lies with the US dollar.

At some point, it would be pleasant to see USD/JPY break from its current trading range, which at the moment is defined by ¥101- ¥103. Apart from two spikes above ¥103 in March and April, the range has remained intact since the beginning of February.

With geopolitical tensions easing, safe haven demand for the yen has abated, while the prospect of more quantitative easing from the Bank of Japan will leave the yen looking less attractive.

The move higher in the daily RSI gives the impression that this move has legs, meaning that traders should keep a close eye on ¥103. The turn higher in the weekly stochastic momentum indicator is another sign that there is strength behind the current price action, giving preference to long positions.

USD/CHF could drop to CHF0.91 level

The CHF0.91 level is holding as resistance in the current upward move, as the US dollar struggles to find reasons to push higher, but even a drop back in the direction of the 50-DMA would not imperil the rally.

We could see a drop back towards the CHF0.90 level, with a declining daily RSI and moving average convergence/divergence appearing to reinforce this idea, but this would likely bring out the buyers once again.

Beyond CHF0.91, there is some resistance at CHF0.9130, but overall the upside scenario takes precedence at present.

As with USD/JPY, the decline in the global tensions that prevailed in the first week of August should continue to aid the upward move in this currency pair, with only a drop through the 50-DMA around CHF0.89 being sufficient to cancel out the bullish scenario. 

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