Starting from the Asian session the USD has been rising and the pair USD/JPY has reached the new highs at the level of 122.65, leaving the channel of 122.00–115.55. The rise in the pair was triggered by the overall strengthening in the USD and weakening in the Yen due to extra soft monetary policy of the Bank of Japan.
In addition, vice chairman of the US Fed, Stanley Fischer said in his speech that the Central Bank is planning to gradually raise interest rates in the next three-four years. Thereby, he has confirmed intention expressed earlier by the head of the US Fed Janet Yellen to raise interest rates in the USA before the end of this year.
Today, investors are waiting for the US news including important data on the orders for durable goods excluding cars in April at 15:30 (GMT+3); at 16:00 (GMT+3) housing price index for March and preliminary business activity index Markit for May, as well as business activity index in the service sector Markit for May. Market volatility is going to be high today and the USD has a chance to undergo correction from the highs reached this morning. Nevertheless, uptrend in the USD will remain.
This week US GDP for Q1 will be released. If the data proves to be the same as the forecast or better, it will give growth momentum both for the USD and for the pair USD/JPY. It is possible that the pair will reach 123.10 (highs of 01.07.2007).
Support and resistance
The pair has reached new highs in the last 3 months, breaking down strong resistance level of 122.00 and leaving the channel. However, new momentum is required for the further upward movement in the pair. Currently, it seems unlikely that the pair will go above the level of 122.75. Stochastic on the hourly, four-hour and daily charts is in the overbought zone, while OsMA indicator is in the buy zone.
Support levels: 121.70, 121.50, 120.80, 120.30 and 120.00.
Resistance level: 122.80.
It is recommended to open short positions from the levels of 122.50 and 122.60 with the targets of 122.00, 121.70 and 121.50. Stop-loss is advisable above today’s highs plus 20-30 points, which is the level of 123.00.
Alternative scenario: in case of favourable U.S. news the pair will go up to the highs of July 2007 (123.10) or higher up. General market trend of strengthening in the USD will continue in the medium-term if the US Fed confirms intentions to raise interest rates before the end of this year.