USD/JPY Technicals – Trading Above Hourly Kumo

USD/JPY took a small step towards the fabled 100.0 level earlier as price managed breakout of the Hourly Kumo that was threatening to suck price lower.

Hourly Chart

Price was caught in between Kumo’s downward pressure and 99.0 support yesterday , with 99.0 support emerging as winner during early European hours. Prices took a shallow dive during early US trade after the release of FOMC minutes , pushing USD weaker due to the continued dovishness of the Fed voting members. However, the minor dip was rejected by 99.0 once again, and price propelled higher due to increasing risk appetite, which also saw S&P 500 hitting record highs incidentally. However, the increase in risk appetite merely sent USD/JPY touching 99.9, less than 25 pips higher than 9th April peak.

Price dipped a little during Asian hours, with Kijuu Sen providing support. Stochastic readings have came down significantly after entering into the Oversold region, and suggest that price may still head lower from here out. Nonetheless, support can still be found via 99.0, with current rising Kumo (which has avoided a bearish Kumo twist) likely to provide additional support. With that being said, price could trade into the Kumo once again if it maintains current levels. If price manage to trade within and push through the Kumo on the downside, we could see added bearishness that will help to break 99.0 support which may usher in new bearish bias.

Daily Chart

Daily chart is more encouraging than yesterday though. Price appeared to be stalling due to the “hammer” candlestick 2 period prior, and the longer bullish engulfing candlestick that followed it is the best bullish response that bulls could ask for. This negate the bearish pressure, while the new high forged allowed bulls to zoom in closer to the 100 mark and the 261.8% extension.

This development is interesting considering that Kuroda has just said today that BOJ is done with stimulus efforts, for now at least. This could be simply a red herring to placate G20 and prevent any reprisals from the global community. However, it appears that US and the rest of the world are particularly forgiving about BOJ’s shenanigans. Fed’s Bernanke and IMF’s Largarde have came out this week lending support to BOJ’s efforts, commending that these efforts are congruent to global growth and will help other Central Banks in their efforts to keep their economies afloat. Therefore, Kuroda’s latest comments may be an accurate reflection of his intentions, and not merely smokescreens and charades for the international community. What this imply is that BOJ is highly unlikely to come out with bolder and stronger easing measures in 2013, which also means that USD/JPY upside potential may be severely limited on the JPY weakness front moving forward.

That’s not to say price cannot continue higher from here. S&P 500 has just reached new highs, and if risk appetite continue to rise, we could see USD/JPY moving higher. However, looking at USD/JPY’s muted reaction to S&P’s high and the peculiar reaction during NFP release, it may be safe to say that current correlation to risk may be decoupled, which brings us back to BOJ easing being main directional driver once again.

More Links:
USD/JPY – Pair Trading Quietly Close to 100
AUD/USD – More people losing jobs than expected
EUR/USD – Eases Back from the Resistance Level at 1.31

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