USDJPY: Importance of 11800 and Upcoming Headline Risk
USDJPY short-term technical picture has a confluence of lines to work with as reference points in the short run, while it remains stuck in an intermediate-term range dating back to early December. The 4-hr trend since mid-January has been up, albeit a choppy one. This should stay intact as long as it stays above the 11800 level. There are three degrees of support there; a floor for much of the month has been put in around the 11820-11840 area, trend support off the 1/15 low connecting with the 2/3 low runs up just over 11800 at this time, and a trend-line passing down over the peaks of December and January. (See Chart.) A break below 11800 would turn my view negative.
On the fundamental front – Early in the Asian session, the BoJ released its Jan meeting minutes and the reaction by the market was muted as no indications of any significant policy changes were expressed. No surprise here. This week, we have key U.S. economic numbers to keep in mind. (Most notably USD Markit US Composite PMI (FEB P), Consumer Confidence, CPI, Durable Goods Orders, & GDP.) JPY release of inflation numbers on Thursday (23:30 GMT) could shake things up provided concerns by the central bank to boost inflation. (See here the medium to high risk events on the calendar for the week.) On Tuesday and Wednesday, Janet Yellen will provide semi-annual monetary policy testimony to congress. This, too, will unquestionably have trader’s attention.
As per usual, I won’t be reading into what the data ‘says’ or what comes out of Janet’s mouth, but rather how market participants react to the headlines. I’ll continue to focus on the short-term picture, keeping any trading activity in the pair tight with in mind the overall choppy trading environment.
