After three days of declines, the Yuan stopped falling. Today, China’s Central Bank set the midpoint for the value of the Yuan at almost the same level where it was yesterday. Markets are recovering after the Yuan's fall which lost nearly 3% against the US Dollar.
Today, during the Asian session, NikkeiStockAverage fell by 0.4% and the nearest Nikkei futures opened with a 110 point gap, as investors express doubts whether the Japanese economy is really recovering.
Japan’s GDP is likely to shrink by 2% in the second quarter, so the Bank of Japan continues its ultra-loose monetary policy, keeping the interest rate near the zero level. Even if Fed shifts its interest rate hike by the year-end, the USD/JPY pair will remain weak in the medium run. Local falls should be considered as corrections to build up or open long positions.
Support and resistance
OsMA and Stochastic on the daily and 4-hour charts turned to sales, indicating the further downward correction.
Possible target levels are 124.10 (23.6%Fibonacci and ЕМА144) and 123.80 (ЕМА200) from which short positions should be opened.
Support levels: 124.10, 123.80, 123.15, 123.50.
Resistance levels: 124.50, 125.20.
Open long positions from 124.10, 123.80 with targets at 124.50, 125.00, 125.65 and stop-loss at 123.40.
Open alternative short positions when the level of 123.15 (38.2% Fibonacci) is broken through with targets at 122.35(50% Fibonacci), 121.60 (61.8% Fibonacci). The pair is unlikely to fall lower than 120.70, 120.00.