USD/JPY- How Low Can We Go?

By: Andrei Tratseuski

The question is: How Low Can We Go? Well, the Japanese Yen is gaining strength amid weaker US Dollar and comments by Japanese officials. Japanese officials pledged to finally balance their budget (which government doesn't?). However with markets rewarding anyone who is willing to close the gap on budgets, the Japanese Yen is gaining strength. Couple of day's before, British government took steps to fix their balance sheets. The drastic move by the newly elected government was rewarded by traders as the British Pound reached 1.5000 in today's trading. Weak US data exaggerated the loses in the USD/JPY pair as dovish comments by the Fed along with grim metrics in the housing sector rang through the markets. Nonetheless, the USD/JPY seems to be oversold at the current juncture and is due for at least some rebound in a short-term future before it may head lower.

Based on our Technical Analysis and fundamental set-ups we see a slight room for improvement in the pair for the upcoming New York Session. Looking for a solid point of support on the charts, we notice a possible double bottom on the pair on current price of 89.20. Furthermore, we notice a solid point of reversal on our ABCD and Fibonacci Extension strategy. Taken look at our strategy we notice ABCD formation with a Fibonacci level which fall at the same juncture. AB line is equal to CD 127.1% line. Therefore, AB line equals 100%, while CD line is 127.1% of AB line. The Fibonacci Extension of AB line that we use is 161.8% extension. Both levels fall around the same level of 89.00-89.10. Therefore, we see plenty of support at current levels. We anticipate the pair to make a correction in near term, without breaching the levels and head a bit higher for the remainder of New York Session.