USD/JPY Pulls Back As Bears Gain Momentum

The US Dollar (USD) fell broadly against the Japanese Yen (JPY) yesterday, declining the price of USD/JPY to less than 109.60. The long term bias remains extremely bullish due to Higher High in the recent upside rally.

Technical Analysis

As of this writing, the pair is being traded at 109.90, continuing the bullish rally that began on September 18th, 2014. Moving upwards, the pair seems to face a moderate resistance at 110.70, as indicated by the trend line.

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On the downside, there is a strong support at 109.57, the 50% fib level from where the price may retrace building a new upward trend.

Fundamental analysis

The US Dollar is going through a record appreciation for past many weeks. This increase in value of the US dollar is supported by positive economic releases indicating a significant progress in US economy. On the other hand, Japanese Yen is getting weaker amid Bank of Japan’s accommodative monetary policy.

Tankan Large All Industry Capex (Q3)

The Tanken Large All Industry Capex report is released on quarterly basis by the Bank of Japan. For the third quarter of the current year, the reading came out to be 8.6%, which is quite more than that of the previous quarter (7.4%). The report is considered as one of the important indicators presenting productive growth of japan. As a matter of fact, high reading is considered bullish for the  Japanese yen while a low reading is considered bearish.

Tanken Large Manufacturing Index

The said report is also released by the Bank of Japan on quarterly basis, indicating growth of the export-oriented economy, this quarter reading stands at 13 as compared to reading of previous quarter that was 12. Generally speaking, a reading above zero impacts positively on Japanese yen and a reading below zero is considered to exert negative impact.

Tankan large Manufacturing Outlook

As an indicator of future business expectations, this report holds significant importance. The report released for this quarter by the Bank of Japan mentions it as 13 which is against expectations of economists. The reading for previous quarter was better (15) as compared to that of current quarter. For a bullish impact, a high reading is preferable, while a low reading is considered bearish for the Japanese Yen.

Trading Strategy

Considering the overall technical outlook, selling the pair around the current levels appears to be a good strategy in short to medium term.

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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