The USDJPY currency pair was able to hold support levels after declining during the Asian and European trading sessions. The decline of the currency pair is more of a function of a risk off trading then an increase in the value of the Yen.
The yield differential between US treasuries and the Japanese yen remained constant near the 215 basis points. The reduction in risk has led managed money to increase short positions in the yen according to the latest industry report.
The move into the risk off trade saw gross short yen position climb by more than 25% to 111k contracts according to the latest commitment of traders report. Speculators had been covering short yen positions through the first quarter. Says Senior Portfolio Specialist Morgan Fletcher from Luxembourg's financial firm James Doyle.
Friday's payroll report saw capital markets whipsaw as initially risk was increased, pushing equity markets higher but profit taking soon entered driving the US markets lower and driving up the yen.
The technical picture for the USDJPY shows a currency pair that broke out last week above a downward sloping trend line and then a retest of that trend line on Monday which coincides with the 10-day moving average near 103.10. A close below this level would likely lead to a test of the 102 region. Resistance is seen near the recent highs near 104.00.
Momentum on the currency pair is still positive with the MACD (moving average convergence divergence index printing in positive territory with declining trajectory. The RSI (moved lower with price action reflecting accelerating negative momentum while printing near 55, which is on the upper end of the neural range.
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