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    USDJPY’s stubborn support zone

    It has been a fairly quiet day on the data front in Asia, which has kept the major FX pairs within their short-term ranges. This may come as welcome relief to traders in the region after this week’s heightened volatility due to massive amounts of headline data from within Asia and geopolitical events moving asset markets throughout the world.

    Despite the big moves this week, including some persistent USD weakness over the last few days, USDJPY hasn’t been able to break through an important support zone around 118.60/80. The market’s lack of faith in yen is holding the pair back, despite the return of safe haven flows.

    The yen is suffering under the BoJ’s massive QEE program and a push from within Japan for foreign debt. The former problem could be further exasperated by more stimulus if we don’t see a pickup in inflation soon – the recent wage negotiations provide a glimmer of hope in an otherwise fairly gloomy outlook for inflation.

    From a technical perspective, our bias is mildly higher above the aforementioned support zone, although it does remains in a medium-term downward trend. The end result may be some short-term strength above 118.80 within a broad sideways trend. Below 118.00, the pair may attempt to test support around 118.30.

     

    Source: FOREX.com


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