by Mike Ber, Forex Alerts
In our previous article we discussed few of the factors that can prevent USD/JPY from rising in the short term. One of the factors we’ve mentioned was “currency war 
talk”. Indeed, Chinese economists warned last weekend that devaluations carried by the Bank of Japan will hurt Asian economies, and the strong retaliation measures will be required to keep Chinese economy competitive. On Friday, late in the day, the US Treasury published its annual report on exchange and policy rates. According the released statement, Japan is advised by US to refrain from additional debasement of the Yen. USD/JPY retraced significantly following the release, and ended the week @ 98.37. Click on graphic for larger view of the war.
We’ve recommended to our members two weeks ago to take profits @99.63 level of resistance. The pair made a new high last week and traded @99.90, but couldn’t break physiologically important level of 100.
Here is an excerpt from our Friday morning report:
“USD/JPY is trading within the 97.80 – 102.421 range. We’ve changed our bias to Bullish-Neutral. Still unable to break the magic number of 100. If 100 is broken the next level of resistance will be @ 102.421. We are waiting for good opportunities to enter a long position. At this point we prefer to enter @97.80 (this level will fill the gap on the chart from last week).”
USD/JPY – 4 Hour Chart
USDJPY is trading within the 97.80 – 99.719 range.
The recent sell off was expected, because the pair was significantly overbought, and tried to break through 100 multiple times. We believe that the level of 97.80 will represent a good opportunity to start to scale back in. Further pull back can’t be ruled out, but given the strength of USD/JPY charts there is a chance that we won’t get more than a pull back to 97.80. The next level of support is 97.197. After that we expect the pair test the recent highs.
EUR/JPY – 4 Hour Chart
EUR/JPY is trading within the 127.299-130.803 range.
We prefer to enter long positions in the 125.676 – 127.299 range, closer to 125.67. Out of the two pairs USD/JPY is relatively stronger, and that’s why we prefer trading this pair more than EUR/JPY.
Cross posted with Zentrader.ca.
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