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.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.