The Japanese economy is taking centre stage at present, as Shinzo Abe is set to call a snap election for October in order to maintain power. This comes off the back of North Korea tensions and of course a recent cabinet reshuffle which have improved his approval ratings. The market is now trying to understand the impact of this and if he will change the current head of the Bank of Japan to suit his ideals. At present there is talk that inflation targets will be lowered further in an effort to meet goals set out by the government, so the market is taking this with a pinch of salt and also being somewhat bearish on the Yen (always a positive for the BoJ). If one thing can be said for Shinzo Abe is that he stokes the markets quite well and the 2011 elections were a catalyst for trading opportunities as the bears run amok on the Yen. Personally, I feel that there won’t be the same opportunities as we know the player far too well, but there will still be trading opportunities for Yen pairs with an election.
For the USDJPY there has been a downward trend now for some time, but the reality is that the recent announcements have stirred the bulls for the pair and the Yen is looking weaker. The USDJPY has been taken over by the bulls even in the wake of a weaker USD. Markets thus far have rushed up to resistance at 111.904 before pausing with the next level above being at 113.257. This is not the only major factor as the 200 day moving average is also apparent, and while Yen pairs tend not to respect moving average I would pay attention to this one if the economic days are a little slow. If we do see the bears look to wrestle back control then support at 110.256 and 109.050 are likely to be the major candidates for further movements lower.
Lastly the UK economy will be the next big trade in the coming hours as UK retail sales is due out. With the Brexit there has been a fear it will pass onto the consumer, the reality is that there could be grounds for further growth and for the Bank of England to push rates higher. If they do come in positive then I would expect the pound to rally as right now expectations are quite low.
On the charts the GBPUSD has been a star with the bulls taking control recently. So far it has climbed sharply on news the BoE could raise interest rates and has slowed down with the upcoming retail sales data. Resistance can be found at 1.3619, but the main thing will be support level here as it could take a breather. Support will be found at 1.3425 and 1.3393 at this stage, but the 20 day moving average is also looking like dynamic support and I would expect it to hold up in the short term.