USD/JPY Breaks Down Through Support Following Current Account Report

The yen rallied amid hefty stock market losses in Japan and across Asian markets. USD/JPY opened in Europe below 122.00 after closing Tuesday at 122.48. EUR/JPY fell below 134.00, though has remained above Tuesday’s six-week low at 133.51.

Advisor to PM Abe, Honda, said ahead of a planned sales tax hike in 2017, the government may need to pass a 2.5 trillion economic package to help cushion the impact on households. Reports say that the government would need to take a cautious approach after a sales tax increase last year hurt the economic recover. Elsewhere, Japan posted the largest current account surplus since 2007 in May, at 1.88 trillion. This is the 11th straight month in surplus. The adjusted surplus widened to 1.64 trillion in May. Todays break below 121.55 sets up a test of the May 14 low near 118.90.

Resistance on the currency pair is seen near the 10-day moving average at 123. Momentum is negative as the MACD (moving average convergence divergence) index is printing in negative territory with a downward sloping trajectory. The index recently generated a sell signal as the spread crossed below the 9-day moving average of the spread.

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