USD/JPY: big week as we start out on the offer towards 121.00

FXStreet (Guatemala) - USD/JPY is trading to the downside in the Tokyo opening hour from a high of 121.60 and the 121 handle is under threat at fuller markets return to desks at the start of a key month.

The general tone of last week in the major was better bid as market risk sentiment improved after Black Monday which lifted the major off the lows and on to 121.64 the high for the week.

There were a number of catalysts for a stronger dollar, one of which had been China selling US T-Bills at record volumes, underpinning dollar's strength. At the same time, US GDP data very strong with the preliminary reading for Q2 coming in at 3.7% against expectations of 3.2%. this came the day after a decent Durable Goods outcome, beating expectations when the numbers climbed by 2%, beating the forecast of a 0.4% fall. We also had bullish talk from a series of Fed speakers ahead of the Jackson Hole> where the general theme from the conclusions as the meeting came to end over the weekend was that Central bankers are looking through the recent market turmoil and staying the course in respect to forecasts of inflation reaching the 2% target and a requirement of interest hikes as the economy continues to grow.

A key week for USD/JPY

This week will be key for the greenback, with a series of top-tier data for the US economy that includes the Nonfarm Payrolls report at the end of the week while the ADP report will be monitored ahead of the release for an indication of what the numbers are looking like, although wage growth and the unemployment numbers will be key components for the Fed.

Data may well begin to supersede continued Fed chat leading into the FOMC meeting and interest rate decision held on the 17th of this month.In respect of the Yen, we will monitor the shares and Global stock markets and investor appetite for risk given the recent market turmoil with a keen focus on China, EM's and the commodity sector's performance with the key 200 DMA at 120.70 as an indicator of the market's risk appetite.

USD/JPY: 200 DMA is key

Continued trading above the 200 DMA level would indicate that the turmoil is stabling in the eyes of investors. However, as of the Tokyo open, was apparent that there is an element of risk aversion lurking with equities opening lower with a potential focus on China as reported abandoning its share buying programme to support the market, coupled with a hint from Fisher over the weekend and a hawkish Jackson Hole outcome that September may still be on the cards that is ultimately negative for the stock markets. S&P 500 futures are also down, -1.22% at time of writing.

USD/JPY remains above the key 120.70 200 DMA==<==/strong>

However, technically, USD/JPY is in bullish territory having crossed above the 120.70 200 DMA and with a positive close from the Black Monday lows. To the downside, the key support level is 118.00/50.