USD/JPY further downside seen - Scotiabank

JPY is trading in a remarkably tight range around Tuesday’s high despite comments from Vice Finance Minister Asakawa said Eric Theoret, FX Strategist at Scotiabank, who also noted further USD/JPY losses are likely.

Key Quotes

“JPY is trading in a remarkably tight range around Tuesday’s high, ignoring comments from Vice Finance Minister Asakawa (key FX official) - highlighting ‘one-sided’ and ‘speculative’ movement in the FX market. Such rhetoric typically serves as a warning to markets ahead of intervention, however we see this risk as relatively low given that officials remained on the sidelines throughout the UK referendum turmoil from late June.”

“The broader tone is likely to remain dominant, and its tentative nature leaves JPY vulnerable to gains in the event of a rise in risk aversion.”

“USDJPY short-term technicals: bearish—momentum signals are bearish and the RSI is at 36, leaving ample room for further downside before reaching oversold levels below 30. Trend signals are providing confirmation with a bearish alignment in DMI’s and the crossing of the 9 day MA below the 21 day MA.”

“We look to further downside toward the July 11 open at 100.43 and the June 24 low around 99.02. A consideration of the 2011-2015 rally highlights the importance of 100.60 (50% retracement) and 94.64 (61.8% Fibo).”