USD/JPY recovered in the past week, though gains were limited ahead of 103.50. Demand for the yen as a safe haven is a strong force that doesn’t allow the pair to get much higher. In addition, traders no longer expect the US Federal Reserve to raise interest rates this year. It means that the US dollar bulls lack a considerable driver. Yet, the upcoming American economic events – the minutes of June FOMC meeting on Tuesday and nonfarm payrolls on Friday – will have an impact on the pair in the short term.
If we look at the bigger picture, the only factor that may reverse the situation for USD/JPY to bullish are actions from the Bank of Japan. Economic news from the Asian country are dismal: consumer prices are falling for the third month in a row, and the Bank of Japan’s Tankan corporate sentiment survey, largely conducted before the Brexit vote, showed the mood among the service sectors worsened. As a result, the BOJ will be under pressure to expand stimulus at its meeting on July 28-29. The expectations of such step should provide some support for the pair. In this context it will be interesting what the BOJ Governor Kuroda says in his speech on Thursday. Next Friday Japan will release current account and average cash earnings.
The overall downtrend remains in place. Support at 100.70 and 100.00. Resistance is at 104.00, 105.00 and 106.35.