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USD/JPY- Base at 106.50?
How the mighty have fallen! Just a few weeks ago USD/JPY was racing towards 110.00 and the market was convinced that Fed rate hikes were on the way. But with US yields having fallen more than 30bps in the past month and with risk aversion running rampant, the pair has seen a swift decline and today broke below its former breakout point at 107.00. Tomorrow the market will get a glimpse at the US Retail Sales data which could prove to be the key event of the week. If the numbers surprise to the upside them the theme of lower oil prices and resurgent US consumer could put the bid back into the buck. But if the data one again misses to the downside the market is going to unwind the USD/JPY longs even more and the pair could test the 106.00 level next.
The 106.50-107.00 represents a key support level for USD/JPY and the pair needs to stop its decline in this area if it is to maintain its long term bullish bias. A break below opens the prospect of a move to 105.00 and a full unwind of USD/JPY rally from the summer.