USD/JPY might reach 127 as monetary policy comes into focus

Yen might reach 127 against dollar as central bank's policy divergence is back in focus as Greek tension closes to settlement.

Yen lost ground against most pairs today as risk aversion subsided further with European leaders presenting final proposal on Greece, which might bring country back from the brink.

If Greek parliament passes the much needed reforms and memorandum of understanding by Wednesday, would mean that Greek crisis is done with for the time being and reforms will once again be put to test to bring the country back to growth path.

It would also mean that risk aversion will completely lost grounds and Yen will have anything but to depreciate against dollar.

However, to reach 127 dollar will also have to focus on Federal Reserve rate hike.

Trade idea -

• Yen is currently trading at 123.5 against dollar.
• Long dollar against Yen with stop loss at 121.7 and target of 127.
• Averaging the trade by buying at dips is advised.
• Crucial resistance stands at 124.3 area.