USD/JPY monthly chart
Safe haven demand for Yen remained intact today amid falling US treasury yields and risk-off in equities, thereby keeping the USD/JPY pair around 106.00 levels. The spot clocked a low of 105.63 before recovering to around 106.00 levels.
Will pair see convincing break below monthly 200-MA?
Monthly 200-MA stands at 105.89 level and the pair did dip below the same last month before recovering above the same. Similar action was seen today as prices dipped to a low of 105.63 before strong US advance retail sales figure pushed it higher to 106.00 levels.
Whether or not the pair will end the current month below monthly 200-MA depends on Brexit referendum outcome. brexit driven financial market instability could wipe out December Fed rate hike bets as well and that alone would be enough to push the pair down to 100.00 levels.
Note that markets believe Bank of Japan (BOJ policy tools have lost their efficiency. Hence, USD/JPY is entirely at the mercy of Fed rate hike bets, which in turn are majorly dependent on financial market stability. However, victory for ‘in’ vote may not be enough to push up Fed rate hike bets as the bank would want to see sustained wage price inflation along with labor market tightening.
Acceptance below monthly 200-MA level of 105.89 on weekly closing basis would open doors for a further slide in the pair towards 100.71 (50% of 2011 low-2015 high). On the way lower, monthly 50-MA level of 104.37 could act as a support level as well.
On the higher side, 106.64 (38.2% of 2011 low-2015 high) needs to be breached as that would indicate a short-term bottom has been established. Further gains could run into resistance at 108.75 (daily 50-MA today).