The USD/JPY pair almost touched 125.00 levels earlier on Monday as anticipated by most major investment banks last week. The pair breached 122.00 levels in the last week, which was followed by a sharp rise to 124.12 (June 2007 high) levels. The gains were extended further to near 125.00 levels on the back of a better‐than‐expected US manufacturing data released in the previous session.
Moreover, such was the sharp rise in the USD/JPY pair that the overall market’s appetite for the US dollars last week was heavily influenced by the movement in the USD/JPY pair. However, with the pair closing‐in on 125 levels in the previous session, the pair has switched the spotlight today with the EUR/USD pair, which rose through the critical Fib retracement and expansion levels to print a high of 1.1190 levels.
The markets now bid/offer the USD against all other currencies in‐line with the movement in the EUR/USD pair. Consequently, the USD/JPY pair has dipped to 123.90 levels, tracking the sharp weakness in the USD against the EUR. This strong focus on the movement in the EUR/USD and the resulting moves in the USD across the board are likely to remain in place ahead of the June 5 Greek payment to the IMF.
At the moment, neither of the traditional safe haven assets are showing any signs of Greek driven strength, which indicates markets believe a deal between Greece and its international creditors would be reached. Consequently, the EUR could remain higher against the USD, thereby helping the USD/JPY pair lower as well. On the other hand, if the Greek situation worsens ahead of June 5, traditional safe havens could rise.
Given the Yen’s oversold status right now, it is highly possible that the Yen could put on a great show in case Greece‐led risk aversion sets in. Overall, the USD/JPY pair could witness a correction to 123.47‐ 122.60 levels ahead of the Friday’s non‐farm payrolls report in the US.
USD/JPY 4‐hour chart
The pair currently trades at 124.04. The immediate support is located at 123.47 (23.6% Fib R of 118.88‐124.90), followed by 122.60 (38.2% Fib R of 118.88‐124.90).
A bearish RSI divergence is seen, which indicates doors are open for a sell‐off to 123.47‐123.00 levels
An hourly close below 124.44 could see fresh offers leading to a quick drop to 123.47‐123.0 levels.
On the other hand, a break above 124.44 could see the pair re‐test 124.80 levels. However, the bearish view remains intact so long as the pair trades below 125.00 levels.
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