USD/JPY: big speculative long position having to rethink its game plan to the 113 handle
|- USD/JPY has started out subdued in Asia today, sticking to a 7 pip range around 111.24.
- The pair is in a consolidation of last Friday's North America's supply from 111.86.
Despite an upbeat tone on Wall Street and a risk on attitude due to the Chinese intervention that calmed volatility, USD/JPY fell away on a deteriorating outlook for the US economy's Q3 on the back of data misses in the nonfarm payrolls report as well as the services data in the US July ISM Non-Mfg PMI, arriving at 55.7 vs the 58.6 forecast and well below the 59.1 previous.
- Wall Street ends the week on a positive note as investors ignore trade headlines
US Jul Non-Farm Payrolls arrived at 157k missing the 190k forecast and below the 213k previous that was, however, revised to 248k - all of which went to totally undermine the heavy speculative position in USD/JPY with bulls looking for a run to the 113 handle.
USD vs the yen to pick up the trade war safe-haven bid
The combination of the US data and indeed the risks associated with the trade spat between the Washington and Beijing left the pair vulnerable on Friday. But this brings a query into the dollar's safe-haven status now given how the dollar was perceived, or better still was 'assumed' to be the prime recipient of safe haven flows triggered by fears of trade wars. Once the market has absorbed the data implications, and perhaps continue to figure that indeed the central bank divergence and spread gives the dollar the advantage, there could be again some modest appreciation in the value of USD/JPY towards the 113 handle.
USD/JPY levels
However, Valeria Bednarik, chief analyst at FXStreet argued that, technically, the pair is bearish as it resumed its decline after correcting up to the 61.8% retracement of the 113.17/110.58 decline, now struggling with the 23.6% retracement of the same decline at 111.20:
"In the daily chart, the pair continues developing above its moving averages, but technical indicators resumed their declines with the Momentum near its recent multi-month low and the RSI re-entering negative territory. Shorter term, and according to the 4 hours chart, the technical outlook also favors the downside, as technical indicators are ranging near their weekly lows, although with no certain directional strength, while the pair is well below its 100 SMA and barely holding above the 200 SMA, both flat."
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