The greenback going under?

1st Dec 09, 1100 GMT

The USDJPY pair touched a new 14-year low of 84.800 on Friday, the lowest since July-95 as the greenback mudslide continued. The pair has broken the key support level of 87.10 and is trading below it at 86.890 at the time of writing this report, threatening to test 80. The Japanese government appears unlikely to interfere unless it breaks below that level, which could lead the way to an all time low of 79.75 (Apr-19th, 1995). 

Demand for the ¥en is gaining momentum as dollar loans are cheap. This strength is affecting the Japan’s economic recovery as the Yen has gained more than 8% in the past 3 months driving export surpluses lower and lower. Erstwhile Yen-shorters are now longing it to limit their losses.

Bollinger Bands indicate a downward breakout with the pair currently trading below the lower line. There appears to be zero strength in the pair which is currently trading below the 14 and 21 day SMAs, signifying negative divergence, while making fresh red candles. The ichimoku chart is confirming a downward view as the USD is below the bottom line of the cloud and the shorter-term conversion line remains below its longer-term baseline.

The RSI further is indicating the pair to be oversold, currently at 30.73, with OBV falling sharply in the recent past, suggesting strong selling pressure. The MFI indicator is also below the psychological level of 50,  trading at 47.2113 indicating short trading.

Traders can short with the target of 83.702 with a tight stop loss of 84.872. The pair may show some corrective upside limited retracement but the overall trend remains downward.

USDJPY