The USD/JPY exchange rate tumbled 1.42% to an intraday low of 122.1 yen per dollar on Monday, despite the Japan Ministry of Economy Trade & Industry report that industrial production fell 2.2% month-on-month in May, missing the median estimate of a 0.8% drop. The decline is at the fastest pace in three months, as exports remain in the doldrums. The ministry also said that its manufacturers survey shows the output will rise 1.5% and 0.6% in June and July, respectively.

Separate data on Monday, from the Cabinet Office of Japan, showed that retail sales rose 3.0% in May from the same period a year ago, more than the median estimate for a 2.3% annual increase. 

The probability of a September Fed rate hike increased after the Bureau of Economic Analysis (BEA), U.S. Commerce Department, said last Wednesday that the final reading of the U.S. first-quarter gross domestic product (GDP) was revised to a contraction of 0.2% at an annual rate, versus a previous estimated decline of 0.7%. The revision, in line with forecasts, was made as exports dropped less than previously estimated as well as a bigger increase in consumer spending.

The BEA also said last Thursday that U.S. consumer spending surged a seasonally adjusted 0.9% in May, beating economists’ forecast of a 0.7% rise. The May core personal consumption expenditure (PCE) price index, excluding food and energy, came in at a 1.2% increase from a year ago, in line with analysts at Bank of America Merrill Lynch.

In the past week, traders appeared to ignore hard economic data and are leaning towards short-term safe-haven trading, as the Greek debt drama seems to have no end in sight. There will be a referendum in Greece on July 6 to determine whether Greece will stay in or exit the eurozone. Until then, the money flows into safe-haven currencies could continue.

As of June 23, there are 162,287 short positions of Japanese yen (CME:6J), traded on the Chicago Mercantile Exchange (CME), by asset manager/institutional and leveraged funds, a decline of 5,290 contracts since June 2. This is compared to about 38.663 long positions, a drop of 11,674 contracts since June 2, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. Net short positions have increased about 16,964 contracts from June 2 where Japanese yen contracts are traded in units of 12,500,000 Japanese yen.

Technically, the USD/JPY has been trading in a pseudo ascending triangle without the traditional flat top, since November 2014, with the head resistances between the 120.50, or ~ 61.8% Fibonacci retracement, and the 122 yen per dollar levels. At the end of May, the USD/JPY broke out of the ascending triangle but failed to break through the upper trendline of the USD/JPY up-trend channel. The projected currency exchange for the ascending triangle breakout event is 129.15 yen per dollar, determined by adding the width of the triangle pattern to the point of breakout. 

The Japanese yen has been strengthening since a Bloomberg news wire report in early June that President Barack Obama had told a Group of Seven industrial nations summit that the strong dollar was a problem. A senior U.S. official, as well as Mr. Obama himself, later denied that the comment was made. 

A bullish flag pattern has emerged. The currency pair could make a rebound from the support levels of 121.41 yen per dollar and 120.50 yen per dollar, or the 61.8% Fibonacci retracement level, as asset managers, institutional and hedge funds are still holding large short positions of the yen.