USD/JPY threatens outside day.
Volatility has been the story in USD/JPY today. The move of the day was down as Koichi Hamada, adviser to Japanese Prime Minister Abe, said 105 is appropriate given purchasing power parity.
Soon after the comments, the market had second thoughts and rebounded to 120.40 from as low as 119.70.
What's interesting in the next couple hours is the close. The current level is 120.07 as the earlier rebound fades and the US dollar loses some altitude. The level to watch is 120.03, which was the low on Friday (call it 120.00). If the pair closes below that, it paints a bearish outside day on the chart.
USDJPY daily chart
In the grand scheme of 'outside days' it wouldn't be an important one because the magnitude in relation to recent market moves is modest but it might be a signal for sellers in the week ahead, especially with a quiet calendar.
USB was out today with its FX flows report and noted strong USDJPY buying led by asset managers but hedge funds went short for the first time in four weeks.
Combined, it could be a queue to a retest of this important trendline near 119.
