Another round of massive yen buying was seen in late European session to early US session and this time, USD/JPY also tumbled sharply lower and tapped even into 113 territory,
the lowest level since Jul 2006. There was rumor of BoJ checking rates but BOJ representatives in London declined to offer any comments. Also, while high yielding currencies including Aussie and Kiwi continue their free fall against both dollar and yen, European majors including Euro, Sterling and Swissy are relatively steady against dollar after much worse than expected housing report from US.
Housing starts in US dropped much fore than expected to an annual rate of 1.381m in Jul, from 1.47m. Building permits also dropped to a 10 year low of 1.373m. From the data, in addition to yesterday’s NAHB Housing Market Index which fell to a 20+ record low, there is no signal of bottoming of the housing market yet. Retails sales in UK grew much stronger than expected in Jul, by 0.7% mom, 4.4% yoy, but that offered little support to the pound.
Daily Pivots: (S1) 116.22; (P) 116.94; (R1) 117.31; More
USD/JPY dives further to as low as 113.58 today, taking out mentioned support zone of 114.41 and 115.13 (61.8% retracement of 108.99 to 124.13 at 114.77). At this point, further decline is still expected as long as 115.70 resistance holds. Touching of 115.70 will indicate a short term low is possibly formed and bring consolidation. But upside should be limited below 117.15 support turned resistance and bring another fall.
In the bigger picture, break of mentioned 114.41/13 support zone, together with the long term rising trend line (101.65 to 108.99), indicates that long term up trend from 101.65 has finished at 124.13 too, with bearish divergence condition in both weekly MACD and RSI. Having said that 108.99 (06 low) will be the next downside target. On the upside, strong rebound to above 119.80 resistance is needed to indicate the fall from 124.13 has completed. Otherwise, further decline is still expected even in case of strong rebound and lengthy consolidation.
Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.