USD/JPY has fallen heavily in thin market conditions, taking the exchange rate all the way to 112.20 from a NY close of 112.70, in what appears to be a stop-loss driven move after bulls finally gave up the protection of the 112.50 mid round number.
USD/JPY buyers caught wrong-footed
Judging by the options positioning, a significant amount of in the money put contracts were bought last Friday following the better-than-expected Q4 US GDP number, fueling the current sell-off as these players get stopped out of their positions. The latest US data led to a stronger conviction by market participants to set directional plays in USD/JPY, in an environment more constructive for broad-based USD strength, as it forces the market to re-think the possibility of further rate hikes by the Fede in H1 2015.
USD/JPY turns bearish, 112.00 next
Technically, the resolution below the 112.50 is a bearish development, which should guarantee further selling pressure in Asia unless the 113.00 is re-taken, something quite challenging given the sour sentiment US equities ended with, which will see pressure in Japanese equities and more than likely limit any potential recovery in the Nikkei 225 today. On the downside, 112.00 is next bear target.
(Market News Provided by FXstreet)