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The US dollar edged higher against its counterpart yen during the course of Wednesday’s session, while the euro recoiled as concerns over the health of the European financial system mounted.

The greenback rallied 0.2 percent and settled at 100.69 yen at the close of trade, recuperating some losses after setting a one-month low of 100.085 yen on Tuesday.

Meanwhile, the euro remained steady at 1.1209, dropping below this week’s high of $1.1280 on Monday.  

The euro had recoiled on Tuesday after Germany’s largest lender Deutsche Bank’s stocks declined, marking a record low led by concerns over the $14 billion demands from the U.S. Department of Justice.

The dollar significantly rallied 0.1 percent to 95.551 against a basket of major rivals in late trade.

Expectations on the Dollar

The dollar could find support at the psychologically key 100 yen against the yen, although an opening of that level could send the dollar to test support at 99, marking a low level in the UK’s brexit vote aftermath.

Senior trader Stephen Innes said that the dollar will likely change hands between the range of 100 yen to 102 yen in the near term.

Subsequently, some market players are attempting to take short positions in the greenback if it advances towards 102 yen, Iness said, adding that the dollar-selling is expected to gain if as well if the dollar will break below 100 yen.   

"If we break below the figure it's just going to be like a free-for-all I would imagine down to the post-Brexit level," Innes said.

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Chief strategist at Barclays in Tokyo Shinichiro Kadota mentioned that the dollar is likely to find support above 100 for now, but rapid gains aren’t visible.

"Even after some strong U.S. economic data, the dollar couldn't gain much yesterday, which seems to suggest the dollar has limited upside for now," Kadota said.

It was shown on Tuesday’s data release that the U.S. consumer confidence has improved, while a service survey also showed a better-than-expected results.

Japan’s Index Slips

Japan’s Nikkei share average declined on Wednesday as a strong yen continued to wobble sentiment, while ex-dividend share price adjustments has sent the market to struggle.   

The Nikkei dipped about 1.8 percent or 295.32 points to settle at 16,388.61 at the close of trade. In addition, between the range of 115-120 points are cut from the Nikkei by the ex-dividend price adjustment, according to investors.

As the dollar remained changing hands below 105 yen in two months now, market participants are trading with caution over the export earnings of Japan.

Current Stance of USD/JPY Pair

The chart below illustrates the currency pair’s movement amid growing concerns of dollar trading below 105 yen. Meanwhile, market participants were given the signal for Buy position on the third candle, which in fact did significantly advanced and continued higher on a light trading volume.

In addition, the currency pair consolidated after its peak level and tried to break out on the downside, which did declined in a heavy trading volume. Hence, the pair was currently seen recuperating.  

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Conclusion

As Japan’s Nikkei declined, led by a strong yen, we concluded that the pair will continue to rally and as of now we are still looking for a supporting candle. Thus, if the next candlestick would show another green above today’s trade, the pair is prone to an upside bias.

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