USDJPY: US$ looking to be running out of some steam. Mild downside bias.

The dollar has had a sideways session, with the main theme being one of position squaring ahead of the US long weekend, and with more of the same looking likely in the coming session as the market turns its focus towards tomorrow’s Japan CPI.

Points to watch today on the topside are at 118.00 and 118.50. I don’t really see too much upside above here, although if wrong look for a run back to the recent high at 118.98, where option related sellers would again protect 119.00. Beyond there would trigger stops and would head on towards 120.00, which again will see heavy option related sellers, although in the longer term the target of 124.13 (June 2007 high) remains valid, but will take time.

With the daily indicators looking heavy, any near term direction would seem to point a bit lower. The 200 HMA at 117.50 and today’s session low at 117.43 will provide the initial support, ahead of last Friday’s low of 117.35 and then 117.15.

Below there would head quickly back to 117.00 a break of which could see deeper declines to 116.50 and we could even head back to 115.75 (23.6% of 105.19/118.98) without doing too much damage to the longer term uptrend.

For today, look for a similar day as yesterday, with a mild bias to the downside, but in the longer term, any decent correction will be seen as a decent buying opportunity.