Last week, we saw a fighting week of USDJPY around the strong support level: 102. It failed to break this level after moving below SMA50. The question is whether USDJPY suffers more or holds above 102 level. The mood of trading USDJPY currently is SELL, Why ?:
- Firstly, trouble in Emerging Markets benefit for Yen because Yen is the best safe haven currency. In order, Risk currencies are AUD,NZD,CAD,EUR, GBP ---- Safe Haven Currencies are CHF, USD, JPY. Investors will sell AUD, NZD, CAD first and then buy JPY ,USD; we saw this last two weeks.
- Sales tax hike in April potentially could damage the rally of USDJPY . The target 2% and devaluating of Japanese Yen plan of PM Shinzo Abe could fail completely due to sales tax hike. Last month, the retail sales and consumer spending dropped sharply than the expect of economists; this contributed for the decline of USDJPY .
- Japanese investors stopped putting money overseas in January. Japanese investors are selling foreign bonds average 383B yen each week; they start to repatriate their funds. Moreover, foreign buying of Japanese bonds begins to accelerate: Investors sell other currencies and buy Japanese Yen .
This week, USDJPY is governed by US economic data; there is no major Japan economic data, so NFP report would decide the move of USDJPY . If NFP report is negative, plus FED taper decision last week, U/J cannot hold 102 longer; this support would be broken. On the contrary, if NFP report is positive, US economy advances, Stock market recovers, the decline of U/J is officially stopped.
Firstly, I draw on the chart the line of U/J and SPX : we see a great correlation between U/J and SPX , seem each step of U/J depends on each step of SPX .
Secondly,SMA50 now lies on key : 103.40 . It becomes a strong now.
102 is a strong support ; it could be pierced anytime. There are two very strong supports at 101 and 100. 101 coincides SMA100 , and 100 coincides SMA200. The rally of USDJPY must be hold above SMA200, any move below SMA200, the advance of U/J would stop. Abenomic plan comes to bankruptcy if U/J is below 100 level. If 102 is broken, it will open the door for the next level: 101; an if 101 level is broken, the door for declining to 100 is opened.
If I choose the uptrend for SPX next week, I will LONG USDJPY to 103.40 level. Stop Loss at 101.