USDJPY: Significant support around 110 levels - BBH

Analysts at BBH explain that three times over the past five sessions, the dollar dipped below JPY110.30 to approach significant support around JPY110.  

Key Quotes

“This area held in late March as well, but the inability to sustain modest upticks keeps the greenback vulnerable.  There have been 17 sessions since the Fed hiked and the dollar has closed lower in all but four.  A break below JPY110 still appears as the pain trade, and optionality and stops would likely be triggered, which could lead to an air pocket.”

“The risk of this lessened at the end of last week as the dollar staged an impressive recovery after initially falling to new lows for the week.  Japanese investors may be taking advantage of strong yen to return to global asset markets at the start of the new fiscal year.  On the upside, the JPY111.20-JPY111.50 band needs to be overcome, but only to set up a test on more formidable resistance around JPY112.00-JPY112.20.  We think there is a reasonable chance that this recovery off JPY110 level can spur a return to the JPY114.00-JPY115.00 area.”