BOJ's Kuroda puts the breaks on the USDJPY rally
Maybe "putting the breaks on" is a bit of an understatement. It's more like he threw a brick through the windscreen and the rally swerved off the road, into a ditch and burst into flames
And here we are some 200 odd pips lower than where I left it yesterday. How does that leave us on the charts?
USDJPY H4 chart
The levels I was looking at down below 124.00 have obviously been carved through and we've gone through the 38.2 fib of the May rally from 118.88. The 50 fib of that is at 122.36. A stronger level I'd look to is the 61.8 fib at 121.54 as it also corresponds with a prior S&R level. It's pretty sticky around the whole 121.45/55 area and would be my ideal choice to look at longs. The 50.0 fib is ok but it's a bit too short term for my liking and there's nothing else to really back up the level
At the moment 123.00 is showing as resistance as is the broken 38.2 fib at 123.18. The broken support levels at 123.55/60 and 123.75/80 will likely show up as decent resistance too should we move back up. This move will also reinforce the higher level around 125.65/75 as a range top
I'm mixed on the comments from Kuroda. On one hand we know that the BOJ don't like the currency to be volatile and that's what it has been on the back of the US economic data and Fed expectations, so most of his comments are old hat. It looks like the market is inferring that his comment on the yen falling further is perhaps a sign of a shift in rhetoric regarding QQE and completely removes the expectation of extra stimulus
I also think the move has been exaggerated by the 'Last in, first out" brigade that I spoke about at the end of May. They are the lot that piled into the May rally and will be the ones who were most nervous about any correction. It looks like Kuroda tipped those traders over as the chatter from the desks is that bids were swiftly pulled and stops were hit from the crowds that jumped on that rally
Whatever the take on the comments they now go in the pot with the comments on a strong dollar from the US side of the pond. That now gives us two big parties that are commenting on the level of the currency, and that may well be enough to keep the lid on any further excessive gains.
We're still light on US data but we should get a big clue about the dollar's direction when US traders get in and chew through the overnight news. Dip buying still remains the trade but I'll want to do so against some better technical levels than here