January 07, 2016 12:03 AM EST – The US Dollar (USD) extended downside movement against the Japanese Yen (JPY) on Thursday, dragging the price of USDJPY to less than 118.00. The technical bias has turned bearish because of a Lower Low (LL) in the ongoing downside move.
Currently, the USD/JPY pair trades -0.25% lower at 117.97, struggling to regain lost ground. A sudden bout of risk-aversion seems to have cooled-off a bit as the Chinese stocks are off trading for the rest of the day and the traders are healing their wounds after the heavy sell-off seen in the opening hours of China’s markets, offering some respite to the USD bulls.
The ongoing recovery in USD/JPY appears weak and the yen bulls are likely to take back control as risk-off trades are expected to extend into the European session, with markets bearing the brunt of China economic troubles and falling oil prices.
In absence of significant releases in the European session, the focus now remains on the weekly jobless claims from the US for further cues. While the broader market sentiment will continue to play a crucial role in the day ahead.
In terms of technicals, the immediate resistance is located at 118.50 (confluence of hourly 5, 10, 20 MAs). A break above the last, the major could test 118.75 (daily high). While to the downside, the immediate support is located at 117.72/68 (daily S2 & low) below which 117.22 (daily S3/ Aug levels) would be tested.