The dollar-yen sank on positive gross domestic product figures out of Japan, and momentum began to pickup on the worries that the overall global economic outlook is not as healthy as some analysts believe.
The yen was higher against all major peers with the USDJPY reaching a low of 101.31, a key support level over the last few months. Japan saw growth expansion of 5.9 percent on an annualized basis from the previous quarter, the fastest pace of growth since 2011. Analysts were looking for 4.2 percent and were surprised to the upside due to an increase in investment activity.
Yen futures were also higher on the worry that the overall global economic outlook is changing. Germany was able to beat gross domestic product expectations, expanding .8 percent versus estimates of .7 percent. However, France did not grow at all, falling from a revised .2 percent in the previous quarter. Italy’s growth contracted, hitting negative .1 percent. The overall eurozone growth quarter-over-quarter remained level at .2 percent, failing to beat estimates of .4 percent.
USDJPY is currently trading below the rising trend line created by the low formed on June 13, 2013. Although bouncing off of support, a close below trend, when combined with a lower risk appetite in the market, could signal a further sell-off. If this is the case, look for support at the 200 EMA to be tested near 100.75. Additional support will lay at 100.45 with the target of 99.75 still in play.
Conversely, the RSI indicator shows that demand picks up around the 40 level (where it currently lies). A pullback to 101.88 is probable, and secondary resistance can be found at the 50 and 72 EMAs, which is currently in a bearish convergence.