(Bloomberg) — The dollar is stuck in the doldrums against the yen, caught between two key technical indicators suggesting it will remain in a range until U.S. jobs data this week, according to IG Markets Securities Ltd.
The U.S. currency tested last week the 76.40 percent Fibonacci retracement of the high reached June 5 and the low set July 8, climbing 0.01 yen above it to 124.58 yen on July 30 before falling back. It has also rebounded each time after falling toward the ichimoku-cloud thats acting as a floor amid speculation the Federal Reserve will raise interest rates this year. The greenback was at 123.96 at 7:38 a.m. in Tokyo on Monday, while the top of the cloud was 123.47.
The dollars resistance became clearer after the first test in July to the retracement failed, said Junichi Ishikawa, an analyst at IG Markets in Tokyo. It then rebounded above the ichimoku clouds ceiling, so that level is providing a very strong support.
Having risen for three straight days through July 30, the the dollar may be prone to selling, Ishikawa said, before the release of U.S. reports this week on nonfarm payrolls, wages and unemployment. The greenback may test the top of the ichimoku cloud at 123.36, he said.
Breaking the currencys recent range will require stronger U.S. data on wages and labor costs, said Jun Kato, senior fund manager in Tokyo at Shinkin Asset Management Co. The dollar may climb toward 125 yen as soon as this month, he said.
Kuroda Barrier
Signs of U.S. growth will help the greenback breach the so- called Kuroda barrier which has kept the currency from rising above the June 5 high of 125.86, the strongest level since 2002, according to Kato. The dollar has stayed below that mark since Bank of Japan Governor Haruhiko Kuroda said he couldnt see the nations exchange rate sliding much further when adjusted for inflation and trade.
Equitieswill be a key driver determining the greenbacks direction after the currency resumed a positive correlation with the securities in July, IGs Ishikawa said.
U.S. stocks are becoming resilient to rate hike concerns, reducing the odds of a negative reaction even if data are strong, Ishikawa said. That would prevent a sharp fall in U.S. yields and help support the dollar.
