USD/JPY at dangerously high levels

The USD seems to be gaining against its counterparts. It’s expected to be a more easy going week as the frequency and gravity of financial releases tends to ease.  On a fundamental level, we highlight two issues with the first being the continuous weakening of the JPY. The Japanese currency is driven lower as BoJ’s loose monetary policy continues to feed JPY bears. We highlight the risk of Japan intervening in the markets as verbal intervention do not seem to be sufficient to support the Yen.

USD/JPY continued to rise on Friday nearing the 34 year high markeed by the 160.35 (R1) resistance line. We tend to maintain our bullish outlook for the pair as it has even accelerated its ascent if compared to the upward trendline guiding it. Furthermore we note that the RSI indicator has reached the reading of 70, highlighting the strong bullish sentiment of the market for the pair. Should the bulls maintain control over USD/JPY’s direction, we may see it breaking the 160.35 (R1) resistance line and we set as the next possible target for the pair the 163.00 (R2) resistance barrier. Should the bears take over, we may see the reversing direction, breaking the prementioned upward trendline in a first signal that the upward movement has been disrupted, breaking the 157.75 (S1) support line and reach the 154.60 (S2) support level after breaking the lower boundary of the upward channel containing its movement since the start of the year.  

The second fundamental issue in play, we would like to note is the uncertainty surrounding the common currency. France is to have elections at the weekend and a change in the balance of power is quite probable, while on trading terms the tariffs which are to be imposed by the EU on imports of Chinese EV’s have caused the wrath of China. Both issues could weigh substantially on the common currency over the next few days.

EUR/USD edged higher during today’s Asian and early European session, and is currently in the midst between the 1.0740 (R1) resistance line and the 1.0615 (S1) support level. We tend to maintain a bearish outlook for the pair as long as the downward trendline guiding the pair since the 7^a. of June remains intact and also note that the RSI indicator remains below the reading of 50 implying a bearish predisposition on behalf of the market for the pair. Yet at the same time the pair’s price action seems to have difficulties to form lower lows and has some tendencies for a stabilisation. Should the selling interest be renewed, we may see the pair breaking the 1.0615 (S1) support line and aim for the 1.0450 (S2) support level. On the flip side, should the buyers take the driver’s seat, we may see EUR/USD  reversing course breaking the prementioned downward trendline in a first signal that the downward movement has been interrupted and continue to break the 1.0740 (R1) resistance line and aim for the 1.0890 (R2) resistance level.    

Other highlights for the day:

Today we get Germany’s June Ifo indicators and UK’s CBI trends for industrial orders for June while BoC Governor Tiff Macklem and San Francisco Fed President Daly are scheduled to speak.

As for the rest of the week:

On Tuesday we get Canada’s CPI rates for May and the UK’s final GDP rate for Q1. On Wednesday, we note the release of Australia’s CPI rates for May, Germany’s GfK consumer sentiment for July and the UK’s CBI distributive trades indicator for June. On Thursday we get the Eurozone’s June economic sentiment and from the US the weekly initial jobless claims figure, the durable goods rate for May and we highlight the final GDP rates for Q1. On the monetary front, we note on Thursday the interest rate decisions of Sweden’s Riksbank, Turkey’s CBT and the Czech Republic’s CNB. On Friday, we get Japan’s Tokyo CPI rates for June, France’s preliminary CPI rates for June, Switzerland’s KOF indicators for June, the Czech Republic’s revised GDP rate for Q1, Canada’s GDP rates for April and from the US we get the final UoM for June and the core PCE price index for May.

EUR/USD Daily Chart

• Support: 1.0615 (S1), 1.0450 (S2), 1.0290 (S3)
• Resistance: 1.0740 (R1), 1.0890 (R2), 1.1010 (R3)

USD/JPY Daily Chart

• Support: 157.75 (S1), 154.60 (S2), 151.90 (S3)
• Resistance: 160.35 (R1), 163.00 (R2), 166.00 (R3)

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