Yen volatile on geopolitical risk, intervention talk
The Japanese yen rose earlier today, following Japanese news agency Jiji Press, without quoting official sources, saying the Japanese government may buy yen and sell euros. Also, there was rumors about the ECB checking rates. Intervention talk on both side has pushed EUR/JPY down and strengthened yen across the board. However, Yen slipped in European session after North Korea said that it will conduct a nuclear test, deepening an impasse with the United Nations over the country’s weapons programs. There were much volatility, but without direction.
Elsewhere, dollar continues to consolidate against european currencies in a day without important economic indicators. Eurozone PPI increased 0.1% mom, 5.7% yoy in Aug. Unemployment rate rose slightly to 7.9%. Reactions to these data were muted. Further consolidation is likely until tomorrow’s services data from Europe and the US.
USD/JPY
Daily Pivots: (S1) 117.31; (P) 117.84; (R1) 118.17;
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Much volatility in USD/JPY today. USD/JPY’s retreat from 118.39 was contained at 117.37, after breaking through 4 hours 55 EMA briefly. Subsequent recovery to above 117.75 indicates an intraday low is formed and outlook is turned consolidative.
As discussed before, we’re treat the current fall from 118.39 as correction to rise from 116.08 only since downside is still contained above 116.90 support (61.8% retracement of 116.08 to 118.39 at 116.96). At this point, bias is switched mildly to the upside and further rebound could be seen to retest 118.39 as long as USD/JPY stays above 117.37 low.
On the downside, below 117.37 will suggest fall from 118.39 has resumed for 116.90 support. And, break below 116.90 support argues that the whole rebound from 116.08 has completed and risk retest of this low.
In the bigger picture, since USD/JPY is still trading well above 113.39 cluster support (50% retracement of 108.99 to 117.87 at 113.43), we’re still medium term bullish in USD/JPY. However, firstly, the rise from 113.95 is not convincing and looks corrective. Secondly, USD/JPY is now approaching key multi-year trend line resistance (147.68 to 135.20 then to 121.38, now at 118.50 level). There is substantial risk of another sharp fall in the short term. But we’ll need to see a break below 116.08 or any reversal signal first to turn short term bearish.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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