Recent strength seen in the yen appears short-lived on the back of the divergent monetary policy outlooks between the Fed and BOJ.
- BOJ chief Kuroda reiterated on Monday that the central bank is willing to take bolder steps to achieve its 2% inflation target.
- Also, resurfacing risk-on in the markets post PBoC is supporting USD higher as we head towards the European session.
- USD/JPY hit session highs at 119.69 in Asian trade before edging lower to currently trade at 119.52, with 4H 5-DMA offering immediate support on the downside.
- The pair was rejected at lows around 188.70 in Monday's trade, and doji formation seen in the Asian session.
- 119.01 (61.8 % Fib retracement of 116.08 to 123.75 rise) is immediate support on the downside, while 120 (5-DMA) is resistance on the upside ahead of 120.38 (10-DMA).
Arguments for upside in the pair:
- A close above 119.01 - 61.8 % Fib retracement of 116.08 to 123.75 rise in yesterday's trade
- RSI on daily charts has bounced off near 30 levels
- Stochs show a bullish crossover but remian in the oversold territory, a rollover will definitely indicate a buy signal
- Declining weekly prices from Dec 14 week not supported by volumes
Recommendation: Good to buy dips around 119.40, SL: 118.65, TP1: 120, TP2: 120.45
