Japanese yen rebounds off key resistance

The Japanese yen is the top performer at the close of European trade with an advance of 1.17% on the session. A strong bout of risk-aversion has propped up demand for the low yielder with the yen besting all its major counterparts early in the week. The USD/JPY reversed sharply off key resistance at March low and the May high at the 80.60 pivot level. Interim daily support rests at the 23.6% Fibonacci extension taken from the February and June lows at 79.60 and is backed by the 20-day moving average at 79.25 and channel support, currently around the 79-figure. We maintain our medium-term bullish bias on the pair with the pullback offering favorable entries between the 200-day moving average (currently 78.84) and the 23.6% extension. Note that the pair is likely to remain under pressure so long as market sentiment remains on the defensive with only a break below June 15th low at 78.62 invalidating our current setup. Daily RSI has now rebounded off the 60-mark, suggesting that the oscillator may look for another bounce off former RSI resistance before resuming higher.

The scalp chart shows the USD/JPY holding within the confines of an ascending channel formation with the pair currently trading just below the 50% Fibonacci extension taken from the June 1st and 15th troughs at 79.65. Interim support now rests at the 38.2% extension at 79.40 backed by the confluence of channel support and the 23.6% extension at 79.10. A break below this level risks a more substantial correction with such a scenario eyeing soft support and 78.85 and the June 15th low at 78.60. A breach above the 50% extension eyes topside targets at the 61.8% extension at 79.90, the 78.6% extension at 80.28 and the Sunday open high at 80.60.

Key Levels/Indicators

Level/Indicator

Level

200-Day SMA

78.84

100-Day SMA

80.50

50-Day SMA

79.83

2012 JPY HIGH

76.03

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