[AndrewWoo]

USD/JPY – Although the USD pushed higher for the better part of this week, we do not think the move is that convincing from a technical point of view almost regardless of today’s slump in price. USD gains have been capped by the neckline of the H&S top and the USD is in danger of slipping below the base of the “cloud” support (95.60) through the close of business today. The neckline of the H&S top and the base of this week’s gains may be forming a bear wedge, the base of which will rise towards “cloud” support in the early part of next week. At the moment, support stands at 95.19 and a break under here will signal a resumption of the move lower. With the H&S top intact (and targeting a drop to 89.36) still, we have to remain negative and reaffirm the view that rallies are selling
opportunities. Revert to neutral only on a daily close above the neckline. Sell rallies.

[AndrewWoo]

The head and shoulders neckline held is as resistance towards the end of last week and USDJPY has fallen despite developments in the fixed income and stock markets where the yield spreads still argue for a higher USDJPY as does the improved risk appetite, reflected by the rally in the stock market. To us this reflects the extent of USD weakness in the market. The next decent support level is at 93.55 and the head and shoulders top targets 90.00. Note that yields are also looking heavy in the short term now which could be a catalyst for a move down in USDJPY.