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Fundamentals

During Thursday's (July 13th) Asian session, the USD/JPY was oscillating narrowly, and it is currently trading near 138.4. Yesterday, USD/JPY dropped sharply downward due to the further decline in U.S. CPI data which back to the 3% level. At the same time, the Fed released the "Beige Book", which showed that the U.S. economic activity grew slightly in the past weeks, the number of employed people also increased slightly, while prices rose generally. Besides, employment picked up a bit, while the overall price increase is more moderate, causing the USDX to fall below the lower area of this year's oscillation range at 100.7, and reached its lowest at 100.5. Similarly, the JPY also followed the trend and USD/JPY once reached the lowest in the past 3 months at 138.5. After nearly 5 days of depreciation, the USD/JPY has been falling from 145 down to 138.5 by 4.5%, such a deep decline suggested an oversold situation and a rebounding demand. Thus, traders can take profits from the previous short positions, keep a bearish view but not chase the short, and patiently wait for the next round of rebound and then try to go short. For aggressive traders, try to keep a small position for stop-loss and bet on a rebound.

Data: U.S. annualized CPI (without seasonal adjustment) of June was 3%, lower than the expected value (3.1%) and the previous value (4%). Besides, the U.S. annualized core CPI (without seasonal adjustment) of June was 4.8%, lower than the expected value (5%) and the previous value (5.3%).

Today's focus: Investors need to pay attention to the U.S. June PPI data and the U.S. initial jobless claims changes, as well as the minutes of the June monetary policy meeting of the European Central Bank, and the San Francisco Fed President Daly and other Federal Reserve officials' speeches.

Technical Analysis

Daily chart: Now, the SMAs of USD/JPY are lining with dispersion towards the bears, while the 5-day SMA crosses below the 10-day and 20-day SMAs. Furthermore, the descending slope is steep, which indicates a possible turn in USD/JPY. However, such a deep slope reflects a possible rebound in demand in the near term.

Trading plan for today: Now, USD/JPY is running too fast, and investors should not chase the bearish trend, but go short after it rebounds. Today, it is recommended to move the positions to a small stop-loss and then go long with small positions. The stop-loss should be set below 138.00 and try to take profits at 140.8.

Trading Recommendations

Trading direction: Long

Entry price: 138.0

Target price: 140.8

Stop loss: 137.7

Support: 137.700/133.800

Resistance: 140.800/142.000