USD/JPY saw some initial sell-off post release of Q2 GDP data, sending price below 96.0 as the weaker than expected GDP growth spurred concerns that Abenomics may be over-hyped, resulting in Yen strengthening on safe haven flow, together with speculators buying up Yen due to doubts that BOJ will be able to “get the job done”.
Nonetheless, USD/JPY remains nicely bidded below 96.0, with Japanese importers buying up USD cheaply in order to hedge their future USD costs. As of writing, there are reports that major Stop Orders for short positions at 96.5 has been taken out, with more lying around 97.0+ and 97.2+. Bear in mind that these are orders of huge institutions, but it seems that retail flows are not much different, as evident via OANDA’s OrderBook which shows a larger concentration of buy orders around 97.0. However, OANDA’s OrderBook also show a larger amount of sell orders just under 97.0, suggesting that bulls will not have an easy time to hit above current levels.
Looking from technical point of view, it seems that the retail traders are looking at the resistance level around 96.8 – 97.0, which has been keeping bulls at bay since 8th Aug. Stochastic readings show that current price is Overbought, and even though readings are still pointing higher, a bearish cycle seems possible moving forward especially given the overhead resistance. If 97.0 is indeed broken, we may see quick acceleration towards 98.0 as the bulk of traders shorting just below 97.0 will be caught out, adding fuel upwards. On the other hand, should 96.8 hold out, 96.0 will reopen as a viable bearish target with 96.5 providing some support in the interim.
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