FxWirePro: USD/JPY breaks above 20-DMA, bullish divergence raises scope for upside

• The Yen weakens across the board as traders do not see a further escalation of tensions in the Korean Peninsula.
   
• USD/JPY has broken above 20-DMA at 109.74, intraday bias bullish.
   
• We have seen a bullish divergence from price action on RSI and Stochs which raises scope for upside in the pair.
   
• Close above 20-DMA could see test of 110.61 (23.6% Fib retrace of 118.662 to 108.130 fall).
   
• Cloud is offering strong support on the weekly charts. The pair is holding 5-DMA support at 109.55, we see weakness on close below.
   
• Focus now on US Q2 GDP due for release at 1230 GMT for further impetus. Trump’s speech on tax reforms will also be keenly watched.
   
• Markets expect the GDP to be revised higher to 2.7% y/y from the initial estimate of 2.6%.
   
• Meanwhile, the ADP is expected to show the US private sector added 185K jobs in August vs. 178K additions seen in July.

Support levels - 109.55 (5-DMA), 109, 108.80 (June 14 lows), 108.72 (weekly cloud base)

Resistance levels - 110, 110.61 (23.6% Fib), 110.95 (Aug 16 high)

Recommendation: Good to go long on close above 20-DMA at 109.74, SL: 109.50, TP: 110/ 110.60/ 111

FxWirePro Currency Strength Index: FxWirePro's Hourly USD Spot Index was at -1.57567 (Neutral), while Hourly JPY Spot Index was at -26.8277 (Neutral) at 0900 GMT. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.

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