USD/JPY: will there be a correction?

31 July, 2014

Current trend

On Wednesday the pair USD/JPY has grown by over 100 points, reaching the four-month highs of 103.08. Sharp rise in price was caused by news that preliminary volume of the Japanese manufacturing industry dropped by 3.3% in June; while the US GDP increased by 0.4% against expectations of 3.0%. Strong American economy provided significant support to the USD.

To the moment the pair has corrected to support level of 102.80. Market participants are waiting for the most important information of this week- the data on the US labour market for July. It is expected that Non-Farm Payroll index will amount to 233 thousand people, showing the decrease in comparison with the previous value. In this case the pair USD/JPY may undergo correction.

Support and resistance

In the near future the price is likely to move in the narrow range of 102.70-103.00. Investors do not wish to take risk in advance of the important news release. If negative forecast for the American labour market proved to be true, the pair may undergo the correction to the levels of 102.60 and 102.40 and probably 102.20. Otherwise uptrend may resume and the pair may go up to the levels of 103.35, 103.65 and 104.00. Technical indicators give mixed signals, demonstrating uncertainty in the market. Bollinger bands are directed upwards. MACD histogram is in the positive zone, its volumes are increasing. Stochastic lines have left overbought zone and formed a sell signal.

Trading tips

In the current situation it makes sense to open short positions with the target of 102.40 if the price consolidates below the level of 102.70. Long positions with take profit of 103.65 can be opened if the price consolidates above the level of 103.00.

Presented by LiteForex

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