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    USDJPY: China-Driven Safe Haven Demand Could Expose 120.00 Next

    It looks like this is really it for Greece, for real this time.

    Greece’s creditors presented a united, unaccommodating front last night, demanding that Greece submit a new bailout proposal today for review over the weekend. German Chancellor Angela Merkel opined that there were “only a few days left to find a solution” and that she was “not especially optimistic,” while European Commission President Jean-Claude Juncker warned that creditors “have a Grexit scenario prepared in detail.” EU President Donald Tusk was even more pessimistic, stating that “Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system…[i]f someone has any illusions that it will not be so, they are naive.”

    The market reaction to this latest escalation has been limited, with the steady trade in EURUSD hinting the market’s expectation that an agreement will be reached this weekend. Indeed, the latest lurch lower in the Chinese stock market (and the accompanying collapse in commodities) may be the bigger catalyst for global markets. In that vein, the Japanese yen is catching a big bid today, with the widely-traded USDJPY pair inching below a major support level.

    Technical View: USDJPY

     As of writing, USDJPY is trading all the way down at 121.40, well below previous support at 1.2200. More significantly, a close near current levels would represent a bearish breakdown from the pair’s six-week descending wedge pattern, which could turn the near-term bias conclusively lower. Looking to the secondary indicators, the daily MACD is trending lower and has now broken below its signal line, signaling an outright shift to bearish momentum, while the RSI has broken below its own corresponding descending triangle pattern.

    In the short-term, a small bounce is possible off the 61.8% Fibonacci retracement at 121.20 (see chart), but if that key levels gives way, a continuation down toward the 78.6% retracement and key psychological support at 120.00 seems likely. Unless USDJPY sees a massive reversal later today (like the big turnaround we saw in EURUSD and US equities yesterday), near-term bulls will be remain on edge.



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