USD/JPY continue to look bullish, keeping itself above the new 102.0 footing that we’ve discussed yesterday. Despite the correlation that we’ve seen previously, USD/JPY managed to hold its own despite N225 breaking its own 15,000 support. The post GDP data release reaction for USD/JPY was much more muted compared to N225, which is surprising as a much better than expected GDP number should mean that Abenomics is working, and allow BOJ to continue their further work with less restrictions. In fact, Econ Minister Amari stated that the strong recovery in GDP figures were only made possible due to Abe’s policies, and having both facts and strong political support should allow BOJ to weaken Yen some more, especially since G7 has implicitly given Japan the green light to continue what they were doing before.
Hence it is strange to note that price isn’t going up higher, but instead staying around Monday highs. We’ve pulled back quire significantly from the Weekly high of 102.75, with a bearish rejection pattern spotted around US midday. Is this a sign that speculative buying for BOJ’s further stimulus is over? We can’t say for sure, but certainly price will remain a tad more bearish as long as 102.50 isn’t cleared. A move higher above 102.50 and preferably 102.75 will most likely face resistance at 103 which would be close to the rising trendline if price does bounce higher from here. On the bearish front, a break of 102.0 will find support around 101.5 which will be the last support that prevents bears from attacking 99.50.
From the daily chart, there is no evidence that bears are taking over. Yes there is a Doji candle formed but that itself is not enough to prove that a bear cycle is underway. Stochastic readings are flattening out, which suggest that a move below is possible but currently it is too early to tell whether readings will be able to push below the 80.0 mark in order to form a proper bear cycle signal.
With USD continuing to strengthen, USD/JPY bears may have to wait a little while for a proper bearish reversal. Continue to keep a lookout as turning points after a strong trend such as this may be highly volatile yet non-directional, resulting in trades getting stop-out after numerous whipsaws. However, should a winner emerge after the struggle, we could see huge correction lower or bulls may receive yet another booster to send USD/JPY higher in 2013.
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