USD/JPY Forecast: stiff resistance at 106.64, weakness seen below monthly 200-MA

USD/JPY is trading on the front foot in Asia around 106.40 on the first trading day of the week after having run out of steam at a high of 107.49 on falling prospects of helicopter money in Japan. The key events lined up this week are Fed rate decision on Wednesday and Bank of Japan rate decision on Friday. Fed is not seen moving rates this week, but nevertheless traders are likely to scan the statement for clues regarding the next rate in moves. Meanwhile, markets expect Bank of Japan (BOJ) to cut rates/and or expand its QQE program.

Japan posted a trade surplus of JPY 692.8 billion versus the median estimate for JPY 494.8 billion. The rise in surplus was due to 18.8% drop in imports in June, which was far higher than the 7.4% drop in exports. The sharp drop in exports is bad news and only adds to the existing speculation that Japan would come out with a double barreled stimulus plan over the next few days.

Technicals – Strong resistance at 106.45

Daily chart

• We have a confluence of trend line and Fibo level at 106.64 – Falling trend line drawn from Jan 29 high and May 30 high + Falling trend line drawn from Mar 29 high and Apr 28 high + 106.64 (38.2% of 2011 low – 2015 high).
• On the higher side, only a day end closing above 106.45 would open doors for a re-test of Thursday’s high of 107.49. A violation there appears likely in the wake of bullish daily RSI and thus could yield 108.15 (100-DMA).
• On the other hand, pair’s retreat from Thursday’s high of 107.49 and a daily closing back inside falling channel followed by a rejection at 106.45 and a drop below monthly 200-MA of 105.90 would signal a fresh slide to 104.19 (23.6% of Jan 29 high – June 24 low).

AUD/USD Forecast – 50-DMA support stands exposed

Daily Chart

• Aussie’s breach of rising trend line support on Friday on day end closing basis followed by a rejection at 5-DMA level of 0.7479 in Asian session today suggests the currency pair could erase gains and break below support  at 0.7450 (38.2% of 0.6827-0.7835), thus opening doors for 50-DMA level of 0.7407 today.
• The daily RSI has turned bearish following Friday’s weak closing, which adds credence to the possibility of pair moving lower to 50-DMA today.
• On the higher side, only a day end closing above 0.7490 (50% of 0.7835-0.7145) could yield a re-test of 0.7571-0.7597 levels.

NZD/USD Forecast: Sideways to bearish move likely

Daily Chart

• Kiwi’s sideways move on Friday following a 7-day losing streak suggests short-term exhaustion following a seven-day losing streak and could yield another day of sideways trading today.
• However, failure in Asia at confluence of 50-DMA and 5-DMA at 0.7010 followed by a fall back below channel support of 0.6995 indicates another leg lower could be seen, but reckon 0.6951 (Thursday’s low) would hold on daily closing basis, courtesy of oversold conditions on intraday chart.
• On a larger scheme of things, bearish invalidation is seen only above 0.7162 (Mar 2015 low).