USD/JPY bulls just got through the 102 handle and cloud resistance

USD/JPY has been on a sharp bid in Tokyo onto the 102 handle and through the cloud of 101.94 for the first time since 21st September.

USD/JPY has been in recovery mode since the bounce from below the 101 handle on the 30th September and has now broken up through the 4hr 200 sma with daily support at the 50 dma 101.61. The move has come in broad dollar strength across the board after a relatively subdued performance overnight despite the improvement of the manufacturing data, Japan's slightly weaker Tankan report and hawkish Fed speakers starting the week off on a positive basis for the greenback. However, the main event scheduled for the week remains with the nonfarm payrolls on Friday.

"We read the recent FOMC statement and the dot plot to mean that the bar to a December rate hike is low," explained analysts at Brown Brothers Harriman, adding,"The data does not have to improve much for the Fed to act.  Our back of the envelope calculation suggests the US economy created a little more than 200k jobs in September.  The jobs report we expect will be more than sufficient for the Fed to hike rates this year."

USD/JPY levels

We are now back testing the four month downtrend at 102.06/07 where previous failures have left the market sidelined in consolidation. Current price is 101.99, with resistance ahead at 102.00 (Daily High), 102.08 (Weekly Classic R1), 102.32 (Daily Classic R2), 102.84 (Weekly Classic R2) and 102.86 (Daily Classic R3). The break of the resistance is of the cloud at 101.94 the next key resistance comes at 103.55 16th June low.

To the downside, next support to the downside can be found at 101.82 (Daily Classic R1), 101.68 (Yesterday's High), 101.65 (Daily Open), 101.65 (Weekly High) and 101.57 (Daily Low). "Below 99.00 will trigger further weakness to the 96.40 top of the weekly cloud and potentially the 94.75/61.8% retracement of the move up from 2011," suggested analysts at Commerzbank.