The US dollar is getting traction against its Japanese counterpart
The US dollar has been standing its ground against the Japanese yen in recent sessions, so we are looking at an opportunity to buy daily calls on any pullback or a sustained break above recently visited highs. There is no material traction right now, however this could all change quickly as another round of good data pops in from the US economy.
If we look at the charts the current consolidation has started a couple of days back as the pair found a bid in the aftermath of the escalation of the geopolitical situation on Iraq. After the base was set around 101.60-75 area we have seen a mild pullback to the upside and a subsequent continuation of range trading.
After the trend lower has not been resumed, we are waiting for some material data to come out to give us the next direction. For now in our view it is more likely for that to be higher rather than lower as we expect key economic data from the US to hit the wires around 13:30 GMT today.
On the other side of the pond we are seeing a raft of data from Japan early tomorrow morning (or still Tuesday in GMT time - 23:50). The latest trade balance figures will be accompanied with the minutes from the latest Bank of Japan meeting which is set to unveil the discussion on the latest batch of monetary policy measures form the country.
For today however the key release will the the data from the US. Since we are expecting a good result from the CPI figure coming in above consensus estimates of a 1.8% year-on-year in May, we are very likely to see further upward pressure in prices.
To sum it all up we are thinking to buying daily calls around the 101.75-80 area or wait for a break above the double top around 102.10-15 on a sustained hourly basis. There is a risk of a reversal to the downside only after we see a clear break below 101.70, which would target the low side of the range around 101.50-60.