After the huge weekend gap, USDJPY was able to test support at the bottom of the channel near the 121.50 minor psychological level. Price could make its way back to the top to test the resistance near the 123.00 major psychological level.
Stochastic is on the way up, which means that buyers have enough energy to push for a test of the channel resistance. RSI is also moving higher, confirming that buyers are in control at the moment.
However, the middle of the channel has also been holding as resistance, as price recently filled the weekend gap and may be ready to test the bottom of the range again. The 100 SMA is below the 200 SMA, also confirming that the path of least resistance is to the downside.
USDJPY Fundamental Factors
Weak US jobs data released last week could lead to more dollar losses, as the economy added fewer than expected positions for June. Wage growth was also non-existent, which might lead the Fed to delay their rate hike to later this year or early next year instead of September.
Meanwhile, risk aversion could continue to favor the Japanese yen, as the Greek referendum resulted in a “No” vote for austerity and the bailout proposal. This could spread more uncertainty in the financial markets, along with the Chinese equity market selloff.
Over the weekend, Chinese authorities announced the suspension of IPOs and the creation of a fund among brokerage firms to buy blue-chip stocks. However, business and consumer confidence has weakened considerably in China, possibly leading to weaker investment and spending down the line.
Event risks for today include the release of the US ISM non-manufacturing PMI, which is slated to climb from 55.7 to 56.5 and possibly lead to gains for the US dollar. Bear in mind though that weaker expectations of a Fed rate hike could keep the dollar as the weaker safe-haven currency.
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