USDJPY takes out 100, but key 101.25/70 resistance zone lies ahead

Breakdown of today’s USDJPY move:

  • Rally was sparked by the better than expected weekly Initial jobless claims at 8:30am ET (323K vs. consensus 335K, which was down from 327K last week) – The last time initial jobless claims were this low was January 2008.

  • Later in the session (1:00pm ET) saw the $16B 30-year Treasury auction, and even though it was a strong, it lead to another push higher in USDJPY – This saw USDJPY take out triangle resistance, drawn from the April high, around 99.65/70.

  • Within an hour we saw USDJPY break above the key psychological, option & barrier related 100.00 level, which prompted a rapid squeeze higher – This was most likely triggered by a plethora of stops going off simultaneously.

Chart Source: Forex Charts by eSignal

So where might USDJPY go from here?

While we are likely to hear more talk in the media of 105, 110 or even 120 over the coming days, one must realize USDJPY is still faced with a key long-term resistance zone between 101.25/70 (see Exhibit 2), which sees the convergence of the 1999 & 2005 lows, as well as the 2009 high. Furthermore, if this zone is breached it would still be just approaching the long-term 38.2% retracement (of the decline from 1998) around 103.00/10.   

Chart Source: Forex Charts by eSignal

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