USDJPY: Safe haven demand helps Yen as US$ heads lower on the back of lower equities/oil price

The dollar came under pressure, on the back of the lower oil/energy prices, and eventually took out the 100/200 HMA supports at around 120.00 and then broke below the daily Tenkan at 119.80 as the Yen found some safe haven demand, with the dollar falling quickly to a low of 119.37.Further short term losses do look possible where, below today’s 119.37 low, further support would be seen at 119.00 and then at last week’s spike low at 118.85. Under this there will be decent support levels at the daily Kijun at 118.70 and then at the rising trend line, currently at around 118.35 and backed up by the Fibo support at 117.90 (23.6% of 105.18/121.84). If we see the dollar down at around the 118.00 level I think it should be a decent buying opportunity, with a tight stop placed under 117.60. A break of this could see a deeper decline towards 117.20 and possibly even to the major Fibo support at 115.50 (38.2% of 100.74/121.84), but again, if seen would be a good buying opportunity in anticipation of another run higher in the dollar.

On the topside, 120.00 now becomes the immediate resistance ahead of the session high at 120.64. Although the longer term outlook remains dollar positive, I don’t think we are heading back up here today, and the triple top at around 120.80 will provide a further barrier to progress in the near term. A break of this though would see a resumption of the uptrend, above 121.00 for another look at the trend high at 121.85, a break of which would see a run towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time given the resistance levels sitting in between.

Look for another choppy session with a mild downside bias, with a chance of heading towards 119.00 and possibly to 118.70. The topside currently looks limited to 120.00. As I said yesterday, there are roughly $15 Bio of 120.00 option expiries in January and it would not surprise to see this act as a bit of a magnate over the next few weeks.

Economic data highlights will include:

Services PMI.