USD/JPY Should Stabilize Above 120

USD/JPY Should Stabilize Above 120

USD/JPY Should Stabilize Above 120

The deep slide in USD/JPY today triggered our first long entry and since then the currency pair has fallen further. The sell-off was driven by the meltdown in Chinese stocks and Greek uncertainty. While Chinese equities are vulnerable to additional weakness, we believe that the losses in USD/JPY will be limited. First and foremost if Greece and its creditors reach a deal this weekend it will be positive for risk and in turn USD/JPY. Secondly, Fed President and 2015 FOMC voter Williams said he still sees rates rising in 2015. It may not happen in September but there’s a good chance that it will happen before the end of the year. The U.S. economic outlook is brighter than many other countries. The labor market is improving, housing market is recovering and consumers are shopping. U.S. assets won’t be sheltered from the global market volatility but before long, investors should see its growth and yield advantage.

Technically the long term uptrend in USD/JPY remains intact. 120 is a technically and psychologically significant support level. If 120 is broken there is support near 119. Today’s slide has stopped short of this key level and if it probes below it slightly, our second entry will be triggered providing us with a better average price. On the upside, the first area of resistance will be at 122 followed by 123.

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