USD/JPY still bullish, but with caution - Scotiabank

Eric Theoret, FX Strategist at FXStreet notes that USD/JPY technicals are bullish but with caution, on the basis of an outside range of the daily charts.

Key quotes

“JPY has been remarkably volatile through the European session, weakening over 1% and recovering nearly half of its decline into the NA open as market participants considered comments from BoJ Gov. Kuroda in which he pushed back on the concept of helicopter money and reiterated a preference for QQE with negative interest rates.”

“Gov. Kuroda’s comments were delivered to the BBC and recording is rumored to have taken place in mid-June, leaving open the question as to whether his views may have shifted in the past month. The July 29 BoJ policy meeting has been the subject of intense speculation and its timing is set to roughly coincide with the release of details surrounding the upcoming fiscal stimulus. Measures of JPY sentiment remain a headwind as risk reversals continue to fade the premium for protection against downside risk, testing levels last seen in mid-June.”

“USDJPY short-term technicals: bullish, with caution—we have re-introduced our cautious stance on the basis of an outside range of the daily charts, signaling uncertainty following a short-lived test of a fresh one month high. A bearish outside reversal would be completed on a close below 105.83. USDJPY’s momentum signals are modestly bullish, DMI’s are biased to gains, and short-term MA’s are bullishly aligned. Near-term support is expected at the 9 day MA (105.30) and resistance is expected at 107.50.”