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USD/JPY drops to test 118 despite positive China open

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 8, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - USD/JPY is seen fading a spike to daily highs near 5-DMA and now retreats towards the hourly 50-MA located at 118.21 levels, despite the Chinese stocks rebound at open.

    USD/JPY upside capped by 5-DMA

    Currently, the USD/JPY pair trades 0.57% higher at 118.30, holding on the recovery above 118 handle. The major failed to sustain at higher levels and edged higher following a relief rally seen in the Asian indices, especially with a positive opening in China’s stock markets. The Chinese benchmark, the Shanghai Composite (SSEC) index jumps +2.23% while the Shenzhen’s CSI300 index also rallies +2.35% in opening trades.

    The USD/JPY pair moves-off highs post-Chinese open as markets had already priced-in a rebound in China stocks and the resulting risk-on sentiment sent the pair higher to daily highs at 118.58. Moreover, the spike in the major could be also attributed to the lower yuan fix by the PBOC today, which offered some respite to the USD bulls.

    Looking ahead, the sentiment on the global equities will continue to have major influence on USD/JPY. Besides, the US non-farm payrolls data is expected to emerge the main market mover in the NY session.

    USD/JPY Technical levels to watch

    In terms of technicals, the immediate resistance is located at 118.58/60 (daily high/ 5-DMA). A break above the last, the major could test 118.76 (1h 100-SMA). While to the downside, the immediate support is located at 117.78/77 (1h 20 & 10-SMA) below which 117/ 116.95 (psychological levels/ daily S1) would be tested.
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