Last week, following the statement by the governor of the Bank of Japan Haruhiko Kuroda that the real effective exchange rate of the Yen is quite low, the pair USD/JPY fell for almost 170 points. However, on the next day the pair resumed the usual movement towards strengthening in the USD.
The Yen still lacks fundamental driver for strengthening. The bank of Japan is going to continue extra soft monetary policy in order to support economy of the country, while in the USA, on the contrary, the policy is aimed at increasing interest rates.
The only factor, which helps strengthening in the Yen, is its status of the safe-haven currency, which investors always remember during the periods of instability in the financial markets.
In the medium-term the Yen will remain weak and the Bank of Japan is likely to change its monetary policy at the meeting of on 18-19 June.
Among the news of this week, attention shall be focused on the interest rate decision and comments by the US Fed. This factor will determine movement direction in the pairs for the rest of this month; while the data on the Japanese trade balance, which will be known on Wednesday at 02:50 (GMT+3) will add volatility in the pair USD/JPY.
Support and resistance
At the moment the pair is between the levels of 123.15 (Fibonacci 38.2%) and 124.10 (Fibonacci 23.6%). After breakdown of the level of 124.10 the pair will accelerate movement to the highs of the year at the level of 125.80 and will probably reach the highs of 2002 at the level of 135.00. On the daily chart Stochastic gives signals for opening long positions, OsMA is in the sell zone.
On the four-hour chart indicators give signals for opening long positions. The price has pushed off from the levels of 122.40 (Fibonacci 50%), 122.70 (ЕМА144), 123.15 (Fibonacci 38.2%) and is moving in the upward channel with the upper limit of 125.65–126.70.
Support levels: 122.40, 122.85 and 123.15.
Resistance levels: 124.10, 124.50 and 124.80.
It is recommended to open long positions from the level of 122.40, 122.85 and 123.15 with the targets of 124.10, 124.80 and 125.65. Short positions can be opened after breakdown of the level of 121.60 with the targets of 120.80, 120.20 and 119.15.