Forex: USD/JPY At The 99.50 Threshold- Looking For The 'Almost There 100.00'?

Includes: FXY
by: FXstreet

The USD/JPY is testing the 99.50 level again, but as it happened several times on Tuesday, the pair is unable to break it. Excepting the 'bogus' brief collapsed to 98.60, the U.S. dollar has been trading sideways between 99.25 and 99.50 against the yen and now the cross is at 99.43, flat on the day.

The USD/JPY recovered ground on Tuesday as the pair rose from the 98.50 region to test the mentioned 99.50. However, in the middle of the session, the pair dropped over 70 pips in a matter of minutes amid rumors of explosions in the White House in the Twitter atmosphere. Just rumors, as AP confirmed tweet was 'bogus', but it turned risk off momentarily with the USD/JPY as the most affected pair suffering a knee jerk down to 98.57.

"While 100.00 continues to be "almost there", market seems scared to extend price up to the level, showing demand decreasing as soon as price overcomes 99.00," points out our analyst Valeria Bednarik. "Anyway, and for the short term, bias remains bullish according to the hourly chart, with price standing above 100 SMA and this last above the 200- [the] first time in over a week."

The almost there 100.00

After testing the 100.00 level on April 11, the USD/JPY was rejected hard to trade at 95.75 in April 16, but bottoming at this level, the pair was recovering ground to price at 99.90 on April 22. Again rejected to 98.50 on Monday, the cross is now in the boundaries of 99.50, just ahead of 100.00 again.

Technical readings in the 1-hour time frame hold in positive territory, although beginning to look slightly exhausted to the upside and anticipating at least some consolidation before the next move. "Bigger time frames maintain a positive technical tone, supporting the general market idea of dips being buying opportunities," states Bednarik. "Steady gains above 99.50, should anticipate and approach to the elusive 100.00 area, while once above, the pair has scope to extend up to 102.00 this week."

BK Asset Management analyst Kathy Lien warns to "keep an eye on these potential triggers." Lien isn't asking if the USD/JPY will break the 100.00 but when. "Over the past 3 weeks we have seen how important this level is and at this point it appears that a catalyst is needed for it to broken."

Looking for a catalyst is hard as the economic calendar in Japan appears empty until Thursday when Japan will release its weekly report on Japanese purchases of foreign bonds. Lien states that the market has "been waiting for evidence of Japanese investors diversifying into foreign bonds and if we finally get it, the doors could open for a stronger move higher as investors look for this trend to gain momentum. "

Otherwise, "If the MoF's data fails to drive USD/JPY above 100, then it will be up to Friday's BoJ meeting, semi-annual outlook report and Japanese CPI data to trigger the break," she added.

In this line, UBS Research Team commented in a recent report that, "retail clients have been active sellers of yen, but corporate and institutional clients have been slow to react to the slide of the currency in the last six months. As a result, importers now are buying the USD/JPY and yen crosses on any real dips." UBS expects "such import demand for foreign exchange will continue."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.