At the beginning of the week, the pair reached resistance level of 124.09 (23.6% Fibonacci). However, after the release of US statistics on Durable Goods Orders that shrank by 1.8% and GDP figures that presented economy contraction by 0.2%, the pair dropped.
At the same time, the Yen’s growth is limited. Despite some promising figures from the Bank of Japan for June that showed gradual recovery of the economy, investors remain cautious. For example, published on Tuesday the Nomura/JMMA Manufacturing PMI figure fell to 49.9 points. Thus the correction of the pair is unlikely to last.
Tomorrow, markets expect a bunch of releases from Japan. The attention must be paid to the Unemployment Rate and Household Spending for May.
Support and resistance
At the moment, the pair has reached the middle MA of Bollinger Bands at 123.70. Its breakdown would lead to the further drop towards 123.15 (28.2% Fibonacci), 122.35 (50% Fibonacci) and 121.60 (61.8% Fibonacci). However, the most likely is the growth towards 124.90 and 125.63.
Indicators demonstrate controversial signals. Bollinger Bands are narrowing but facing upwards. MACD histogram is in the positive zone, the volumes are falling. Only Stochastic is leaving oversold zone and giving a buy signal.
Support levels: 123.70, 123.15, 122.35, 121.60.
Resistance levels: 124.09, 124.90 и 125.63.
Open long positions after the breakout of 124.09 with targets at 124.90 and 125.63.
Short positions can be opened after the price consolidation below 123.15 with targets at 122.35 and 121.60.