USD/JPY: consolidates the double bottom on 100 handle

JPY is consolidating in a tight range with near-term risk limited to sentiment in the absence of domestic data. 

USD/JPY has formed a double bottom on the 100 handle in a broadly bearish trend from above the 103 handle as investors continue to favour the yen in a risk off environment subsequent to the uncertainties surrounding the central banks. The release of BoJ minutes from the late July meeting provided for minor knee-jerk strength in JPY to a fresh one month high, as noted by analysts at Scotiabank who noted that the move was completely negated by the subsequent response to the U.S. election debate as broad based risk appetite delivered JPY weakness. "Sentiment is likely to remain dominant ahead of retail sales and CPI later this week. We highlight the significant turn in short-term risk reversals, repricing a greater premium for protection against JPY strength (USD/JPY weakness) with a full retracement of the shift from mid-August," explained the analysts.

USD/JPY levels

The analysts at Scotiabank suggested that the USD/JPY short-term technicals are bearish. "USD/JPY has tested a fresh one month low and is consolidating in a tight range around 100.50. Momentum signals are bearish, DMI’s are providing confirmation, and moving averages are bearishly aligned across a range of time horizons. We look to the mid-August low around 99.50 followed by the June 24 low around 99." Meanwhile, with spot that is presently trading at 100.40, the next resistance can be seen at 100.47 (Hourly 20 EMA), 100.57 (Daily Classic PP), 100.69 (Hourly 100 SMA), 100.89 (Daily Classic R1) and 101.00 (Daily High). Support below can be found at 100.33 (Daily Open), 100.32 (Monthly Low), 100.32 (Weekly Low), 100.25 (Yesterday's Low) and 100.09 (Daily Low).