USD/JPY sold off to match Monday's low of 118.78 and since then it has recovered to the 118.90 region as the market moves Fed rate lift-off to the distant horizon. As per our earlier commentary, we continue to believe that the BoJ will wait until the July to provide further easing through expansion of equity-linked ETF and a 5 bps cut to IOER. But economic data have dissatisfied recently signifying that the recovery is fragile. In particular, industrial production and retail sales data have disappointed. On the contrary, Greece threats over Japanese don't seem to have adverse impact and it actually has been quite for some time. Athens refurbishing its negotiating group has supported the euro earlier in this week. In general, good demand has been seen in EUR/JPY pair which has logged an almost three week's top.
Technical and Derivative watch:
EUR/JPY trending above 130.43 Cloud base as it seems like Greek threats over JPY is shrunk away, as a result EUR shorts coverings are visible. On weekly chart bullish trend is seen with crucial support at around 127.2621 levels and on upper side tested resistance at around 131.0550 levels. If it manages to break out this range, all chances of hitting our medium target of 135. But strict stop loss has to be maintained at given supports.
Therefore on traders can either add long positions on futures or just buy necked ATM call options for the purpose of extraction of probable leverage.
