2016-08-18 12:11:15

Overview and dynamics
After at the last meeting in late July, the Bank of Japan decided to leave its monetary policy unchanged, USD/JPY pair dropped sharply to the support level 100.60. During August, USD/JPY pair kept within a range between the levels 102.50 and 100.00.

Since the beginning of June, USD/JPY pair has been trading mainly in a wide range between the levels 108.00 and 100.00. After yesterday's publication of the July FOMC minutes, the weakening of the dollar on the foreign exchange market continued.

The support level 100.60 was broken down, and USD/JPY pair dropped below the psychological level 100.00.

Our opinion
Despite the verbal intervention of representatives of the Japanese monetary authorities, USD/JPY pair continues to decline. The factors of a fundamental nature stimulate investors' demand for safe-haven assets, gold and the yen, and contribute to the overall weakening of the dollar on the foreign exchange market.

Most likely, until the meetings of the Fed and the Bank of Japan (20-21 September), USD/JPY pair will remain under pressure, declining within the channel on the weekly chart with a lower limit near the level 95.00. OsMA and Stochastic indicators on higher timeframes (daily, weekly, monthly) indicate sales.

In case of the further decrease of the pair the support levels will be 99.00, 97.50, 95.00. The reverse scenario suggests an upward correction to the resistance levels 100.60, 101.50, 102.80 (EMA200 on the 4-hour chart).

A deeper correction will be accompanied by the growth of the pair to the resistance level 103.50 (EMA50 on the daily chart), which can cause further rise to the resistance level 106.50 (Fibonacci 23.6% of correction to the decline of the pair since June 2015 from the level 125.65), 107.35 (EMA200 on the weekly chart).

An increase above the level 110.10 (EMA200 on the daily chart, Fibonacci level 38.2%) will cancel the steady downtrend of USD/JPY pair and can create conditions for the further growth of USD/JPY pair to the levels 111.25 (EMA200 on the daily chart), 113.00 (Fibonacci level 50.0%).

However, such a scenario is possible only after the unambiguous signals on raising interest rates in the US from the Federal Reserve and on specific action on quantitative and qualitative easing (QQE) of its monetary policy in Japan from the Bank of Japan.

So far, the fundamental background creates the prerequisites for the preservation of the downtrend fro USD/JPY pair. The most likely scenario is related to the breakdown of the support level 100.00, and the decrease of USD/JPY pair on the weekly chart in the descending channel with lower boundary near the level 95.00.

Support levels: 100.00, 99.00, 97.50, 95.00
Resistance Levels: 100.60, 101.50, 102.80, 103.50, 104.00, 150.00, 106.50, 107.35, 107.90, 110.10

In the downward channel
In the downward channel

The indicators recommend sales
The indicators recommend sales