USD/JPY: bears eye up a test to the base of the cloud, which lies at 109.92

Currently, USD/JPY is trading at 112.05, up 0.26% on the day, having posted a daily high at 112.59 and low at 111.60.

USD/JPY keeps moving to the downside, and the question on everyone's mind now is whether the dollar has lost traction altogether and if so, where can the Yen climb to vs the greenback? 

US: Trade deficit narrows as exports pick up - Wells Fargo

Well, analysts at Scotiabank remain bullish on the US dollar (USD) and expect the greenback’s winning run to extend well into 2017. "Much of the USD’s strength in the last few years was predicated on the idea that it represented the “least dirty shirt” among a group of advanced economy currencies that all had their own challenges. However, markets are anticipating that the Trump presidency will be characterised by pro-business, pro-growth policies which deliver above-trend GDP, higher inflation and stronger corporate profitability to the US economy," explained the analysts, adding, "This will underpin the Federal Reserve’s (Fed) gradual tightening of monetary policy and suggests quite strongly that the USD rally can stand—and extend—on its own merits though H1 2017, at which point we expect gains to moderate."

In respect to the BoJ and a weaker yen, the bank's recent operations show us that the BOJ’s monetary policy is unlikely to be influenced by pressures from the US government, and in fact, Governor Kuroda said today that the BOJ still has a way to go to hit the target and so a continuation of its powerful easing is appropriate and thus we may find that Yen bulls will have a tough time below, say, the 110 handle.

USD/JPY levels

"USD/JPY has started to erode the 38.2% retracement at 111.98 area and the 112.02 April high, this suggests scope to the base of the cloud, which lies at 109.92 and, if seen, we look for this to hold (this is also the 50% retracement of the move up from November)," explained analysts at Commerzbank, adding, "Initial resistance lies at 115.10 (imoku 2) and this will need to be regained in order to alleviate downside pressure and reintroduce scope to key short-term resistance offered by the 16-month resistance line at 118.15."