USD/JPY - Aso's comments kill the technical recovery

  • Yen regains bid after Aso talks down need for FX intervention.
  • USD/JPY drops 30 pips from 106.89.

The technical recovery in the USD/JPY pair fell apart at 106.89 as the Japanese Yen picked up a bid after Japanese Finance Minister Aso played down the need for FX intervention.

Speculation has been gathering pace that Yen appreciation may not go down well with the authorities in Tokyo. However, Aso's comments indicate the policymakers are comfortable with the recent appreciation of the Japanese Yen.

So, for the time being, the JPY bulls have little reason to fear. That said, the technical charts show oversold conditions. The daily RSI has hit the oversold territory. Further, risk reversals have diverged from the spot, indicating a drop in the premium claimed by JPY calls (bullish bets) over JPY puts (bearish bets).

Also, the 10-year treasury yield continues to rise and more importantly the US stock market has remained resilient. Hence, caution is the name of the game for the JPY bulls.

USD/JPY Technical Levels

As of writing, the pair was trading at 106.63. FXStreet Chief Analyst Valeria Bednarik writes, "the pair retains its bearish bias, as in the 4 hours chart, the pair is further below its 100 and 200 SMAs, both accelerating their declines, while technical indicators consolidate near oversold readings, with no clear directional strength. Renewed selling pressure below 106.80 should open doors for a steeper decline toward the 106.00 region during the upcoming sessions."

Support levels: 106.80 106.50 106.10

Resistance levels: 107.30 107.70 108.00   

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Neutral High
1H Bullish Neutral Expanding
4H Bullish Oversold High
1D Bearish Oversold Shrinking
1W Strongly Bearish Oversold Expanding

 

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