USDJPY has dropped below the previous trading range and has since bounce higher from another range near 121.00. Japanese core machinery orders data yesterday showed a jump of 10.7% m/m in October. The market consensus had been for a 1.5% decline, and the data follows a 7.5% m/m gain in September. In y/y terms, orders are up 10.3%. The data are encouraging, and follows a big upward revision in Japan’s Q3 GDP this week, to +1.0% y/y from the -0.8% originally reported, which shows that the country didn’t fall into a technical recession after all. The data has softened the possibility for the BoJ expanding its QQE policy in January, which is the prevailing market expectation.
In the weekly picture USDJPY has broken below a rising trendline and since made a return move to it. Price failed to move above the trendline after which it corrected lower. This creates a third lower high in the weekly picture since June this year and signals that this market is getting bearish. The nearest weekly resistance level is at 122.25 while a weekly high from September at 121.24 acts as the nearest support.
USDJPY, 240 min
The bounce from the 121.24 support suggests that the price could rally to previous support area at 122.60 – 122.80. This area is likely to be a resistance now. This area coincides roughly with the 30 and 50 period moving averages. We will be looking sell signals should the price rally to this area. My targets are 121.50 (T1) and 120.62 (T2).