By Fast Brokers
USD/JPY
We saw the sizeable selloff in the USD/JPY after the currency pair dropped beneath April lows, dipping down to the psychological 95 level on rising volume. The USD/JPY has been trending lower the last week as analysts caution of overbought conditions in U.S. equity markets. We see the positive correlation taking hold of the currency pair as the S&P futures got knocked beneath their psychological 900 level. The key now for the USD/JPY will be staying above the bottom of its left shoulder, or 3/19 lows. These levels are still a comfortable distance away, so investors shouldn’t panic yet.
The resilience of the USD/JPY’s uptrend will likely be determined by U.S. equities. Are we witnessing profit taking in equities, or are U.S. markets in for a second round of pain? Since we have no reason to alter our bullish outlook on the S&P for now, the upward trend in the USD/JPY is still safe. However, the currency pair is getting close to testing its limits and it will be interesting to see how the USD/JPY holds up over the next few trading sessions.
The near-term fundamentals are a bit disconcerting, and investors should keep a close eye on any future downward movements accompanied by large volume. 95.00 should serve as a key psychological cushion for the time being, and if it fails to hold we could see a quick drop towards 94.50. Our 1st tier uptrend line is waiting to defend just below and we could always form additional uptrend lines if need be. Therefore, there are uptrend defense waiting in the wings should the pullback worsen.
Fundamentally, we find supports of 95.33, 95.04, 94.50, 94.14, and 93.89. To the topside we see resistances of 95.69, 96.05, 96.37, 96.66., and 96.95. The USD/JPY is currently exchanging at 95.54.
Market Commentary provided by Fast Brokers.
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