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USD/JPY: bulls break key resistances through to 110 the figure ahead of key events this week

  • USD/JPY is currently pressing higher in a risk-on session here in NY.
  • Crucially, the pair is back above the Kijun line just below 109.80.
  • FOMC: the June 12-13 Fed meeting appears relatively mundane.
  • N.Korea: here is the schedule known to markets, so far...

USD/JPY is currently pressing higher in a risk-on session here in NY as the benchmarks take on higher grounds. Currently, USD/JPY has made a high of 1110.12 and a low of 109.32. Crucially, the pair is back above the Kijun line just below 109.80 and is eyeing the 200-D SMA at 110.18 once again. 

While the yen has cooled off and stocks have seemed to shrug off the disappointing G7 summit, where the only argument could be that the markets had already anticipated a tense G7 meeting, hence the muted reaction to President Trump rejecting the official communique issued by other G7 leaders and strongly criticising Canadian Prime Minister Trudeau in social media, the week ahead still holds plenty of risk to keep a lid on USD/JPY.

Risk events ahead:

With respect to some of the geopolitical events in the headlines at present,  the June 12-13 Fed meeting appears relatively mundane, however, of course still very key for the dollar and EM's. The market has priced in 25bps already, but it has not priced in a fourth rate hike for 2018. Should the guidance provided by policymakers include such a scenario, then it will make for a far more interesting outcome. 

While there are no expectations of changes to rates, the ECB, on the other hand, is certainly one to watch given the hype in the market of the past week or so due to ECM members priming it up for potential announcements with respect to tapering its huge bond purchasing programme. However, it is yet to be seen just how much of the market really expects to see any changes this month around bulls might be found trapped during the event should the ECB's plugging turn out to be a dud fuse. 

More locally to the Yen, the BoJ seems to be a non-event yet again, and a bit of a no-brainer - The central bank is expected to reiterate familiar commitment with respect to its massive QQE programme while the 2% inflation target is still a long shot away. This should be a fundamentally bullish outcome for the pair, but the yen's safe-haven status could mean that the week's political events stay on top of any bullish advances in the pair. EUR/JPY will play a key role depending on the ECB outcome and how positioned the market was into the meeting, one way or the other. 

The Geopolitical events to watch for are North Korea, Brexit and eyes will be on Italy’s Finance Minister staying true to his recent words that the newly formed government has no intentions of leaving the EMU. 

With respect to N.Korea, here is the schedule known to markets so far:

  •    9:00 pm ET (01:00 GMT): Trump and Kim meet
  •    9:15 pm (01:15 GMT): Trump and Kim meet 1-on-1
  •  10:00 pm (02:00 GMT): Trump and Kim are joined by Mike Pompeo, John Kelly, and John Bolton
  •  11:30 pm (03:30 GMT): Trump and Kim have a working lunch and are joined by Sarah Sanders, Sung Kim & Matt Pottinger.

USD/JPY levels

Bulls got back above 10-DMA at 109.43 on a firm footing. This should limit the supply going into the ECB, BoJ and FOMC along with N.Korea / US summit.  The Kijun, 100-hour MA and the hourly cloud base in 109.80s have also all been taken out. So, a close above 200-D SMA will open up risk towards May's 111.39 peaks. 111.50 as an option barrier that stood strong previously, lying just above the 110.39 May high in a congested area where the 161.8% of May low & 76.4% of May drop is located. On the flip side, a break below the Tenkan prop at 109.19, bears can target the 55-DMA & daily cloud top around 108.60. 108.05, (100-D SMA). The 2018 low at 104.56 will be in focus on the downside. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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