NY Evening Forex Commentary for June 6th 2011

The Midday Forex Commentary for June 6th 2011

USDJPY pauses after move higher

As per the prior post the USDJPY had a decision to make. The price found support against the 100 bar MA on the 5 minute chart and used it to push higher. The break above the 200 bar MA on the 5 minute chart accelerated the move to the upside. 

The next target is the high for the day at the 81.53 level. The high for the week comes in at 81.76.  Finally 81.82 is the 38.2% of the move down from the April high (see daily chart below). This is the key target areas ahead.

On the downside, I will be watching the 81.27 level to hold support now (see chart below).  The price level is the low correction after the break higher this morning and the 38.2% of that move from the low.  Staying above keeps the bulls in charge and should lead to a continuation of the move higher toward the upside targets.

USDJPY moves lower after weak Industrial Production

The USDJPY moved sharply higher today on the back of BOJ Shirakawa’s bearish comments on the economy. The weaker US housing data and now weaker than expected US Industrial Production has the pair back on the defensive with support against the 38.2% of the move up from the low being tested at the 81.35 level currently.  A move below the 200 bar MA (green line above) will hurt the bullish move higher today (81.25 area).  Resistance against the 100 bar MA (blue line) will now be eyed for  continued upside clues (at the 81.55 level).

Looking at the daily chart the move higher today reached a new month high.  The pair did find sellers against the 38.2% of the move down from the 85.49 high at the 81.82 level (high reached 81.76).  So although the move higher today was somewhat robust, there seems to have been willing profit taking sellers on the rally.

Japan’s Machine Orders

The March Machine Orders figure out of Japan came out much stronger than expected, actually pushing USD/JPY a touch lower. The Domestic Consumer Goods Price Index was also higher than expected for April. The details of the releases are as follows:

Machine Orders (MoM) - Survey:-10%   Actual:2.9%   Prior:-2.3%

Machine Orders (YoY) - Survey:-8.0%   Actual:6.8%   Prior:7.6%

Domestic CGPI (MoM) – Survey:0.4%   Actual:0.9%   Prior:0.6%

Domestic CGPI (YoY) – Survey:2.1%   Actual:2.5%   Prior:2.0%

USDJPY has cause to pause against trendline support

The USDJPY has a reason to pause as the price has tested channel support. The question now becomes do the dip buyers get satisfaction. Risk is defined against trendline. Targets become the 80.68 level – which was the low from yesterday – and the top side trendline at the 81.00 level.  Breaking these levels will help break the back of the move down at least for the time being.

If the levels can not be breached above, the market is likely to continue its move to the downside.   The 79.89 level is the 61.8% of the move up from the low on March 17th and would be the next target for the pair. 

It does not make sense the pair move too far down of course. Japan has it’s share of problems that a higher JPY does not help solve, but until the trend down is broken, the burden of proof lies with the bulls to push the pair higher.  That proof comes with moves above the 80.68 level and 81.00 levels.

USDJPY tests lows post central bank intervention

The USDJPY his testing the low from the post central bank intervention. The level comes in at 80.69 and the price has been knocking on the door. Although it would seem that if there was interest to buy USDJPY at the level a month or so ago, that enthusiasm may not be there now.  The reason is the intervention forced the market up to a high of 85.51 in the interim.  That surge should have given Japanese exporters the ability to hedge positions.  So although the 80.69 level is a technical level to lean against, a break below does not imply intervention expectations.  On the daily chart below the 80.24 (low from October 2010) and 79.88 level would be the next target (61.8% of the move higher).

USDJPY showing some signs of topping?

The USDJPY is showing some signs of topping.  At the highs from yesterday and today, a ceiling is in place with a number of different hourly bars coming across at the 85.51 level.

The trendline extending up from March 28th was also broken today and although the price has been above and below the underside of the trendline during the economic news releases today, the price is back below but testing the underside of that trendline at the 85.18 level currently.  If the price is able to find sellers in this area (i.e., finds willing sellers that stop the move back higher), there should be some additional profit taking selling that should take another look at the 38.2% retracement of the most recent leg to the upside. This level comes in at the 84.87 level currently and was tested – but not broken earlier today.  The inability to break below this level keeps the bulls still hanging on, but there are some other technical reasons to think, the bears may be gaining some foothold today.  The battle is on. 

Watch the 85.18 level for intraday clues.

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