The USD/JPY managed to bounce off the pivotal 122.00 mark this morning, though it still remains under pressure amid safe haven flows due, above all, to the on-going situation in Greece. Traders are also exercising some caution ahead of the US nonfarm payrolls and other key data on Thursday, which explains why price has failed to rally more profoundly. After all, today’s US data releases were not bad with the consumer confidence index, for example, coming in way ahead of expectations at 101.4 for June.
As a reminder, 122.00 was previously a sturdy level of resistance for the USD/JPY, corresponding to the March peak. This level was taken out in late May, leading to a rally that eventually fizzled out around 125.85 at the start of this month. From this peak, price has retreated somewhat dramatically and has made a few small lower highs. Indeed, the USD/JPY even created a large gap on Monday, pointing to strong selling pressure.
But the long-term trend is still bullish, so the selling pressure could abate soon. Given the technical importance of 122.00, we wouldn’t be surprised if the USD/JPY stages a rally from here. Indeed, what happens here could determine the near-term direction for price.
If the buyers hold their nerves around the 122 handle, the USD/JPY may be able to recover its poise and head towards the resistance levels shown on the chart. The immediate resistance the bears would need to tackle is at 122.70, though a more profound level is at 123.20, which was previously support. The abovementioned gap has not yet been “filled” completely. If price were to break above 123.20, there is a good chance this void will be filled completely. Additional resistance is seen around 124.00 – a closing break above here would be a significantly bullish development.
Meanwhile if support at 122.00 gives way then the bears may aim for the 50-day moving average at 121.85 followed by the 61.8% Fibonacci retracement level at 121.55. The next key support could be the bullish trend around 120.10-40.