The USD/JPY has erased overnight losses as risk appetite has returned on the back of better than expected U.S. manufacturing and construction data. The Purchaser Manager’s Survey for the manufacturing sector slipped to 59.7 from 60.0 but beat expectations for a fall to 59.0 easing concerns that the global growth is faltering. The pair saw overnight weakness as a weak PMI reading from China and a dour fiscal stability report from the ECB had raised concerns. The USD/JPY has started to consolidate as risk winds continue to fluctuate with fading concerns over Europe and fundamentals pointing toward a slow but sustainable recovery offsetting each other. Technical support could lead to further concentration making the pair an ideal scalping target.
Key Technical Levels
The 200-Day SMA at 90.99 could offer support as it is a significant technical level but with recent breaks above and below, it has lost its validity. Nevertheless, a rising trend line continues to be a solid level to target and today’s bounce off of it, adds to its support potential. We are potentially seeing a triangle formation develop which could see the pair continue to consolidate enhancing its activeness as a scalping target. However, these formations often give way to extended moves with breaks of S/R levels.
Quantitative Metrics
Recent consolidation has led to a narrowing of the USD/JPY’s Bollinger band width to 551 pips which puts it at the lower end of the most active pairs. However, the level of variance is still significant and speaks to the pair’s potential for volatility. Yet, we have also seen the pair’s ATR decline to 129 pips which is the lowest of the pair’s listed below and adds to its attractiveness as a scalping target.
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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com
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