USD/JPY Analysis: at a brink of breaking lower
|USD/JPY Current Price: 107.55
- Risk aversion gave the Japanese Yen a lift at the end of the week.
- Japan’s National inflation steady at lows in August.
- USD/JPY barely holding above a critical Fibonacci support at 107.45.
Fresh risk-off flows resulted in the USD/JPY pair trimming weekly gains on Friday, ending the week at 107.55. The pair retreated from a second consecutive day amid news suggesting renewed tensions between the US and China triggering demand for safe-haven assets. Chinese agricultural officers decided to suspend a visit to US farming states, while US President Trump said that he won’t be happy with less than a “complete deal.” Wall Street turned red with the news, while demand for government debt sent yields to fresh weekly lows. Meanwhile, Japan released August National Inflation on Friday, with the headline CPI resulting at 0.3%, worse than the previous 0.5%. The core reading ex-fresh food resulted at 0.5% better than the 0.4% expected but below the previous 0.6%. The country will celebrate the Autumnal Equinox Day this Monday, with local markets therefore closed.
USD/JPY short-term technical outlook
The USD/JPY pair has settled a handful of pips above a critical Fibonacci support at 107.45, the 61.8% retracement of its August decline. The pair has been developing above the level for two consecutive weeks, with approaches to it attracting buying interest. That said, a break below the level will likely imply further slides ahead. In the daily chart, the pair is now below a bearish 100 DMA but still holding above a bullish 20 SMA, while technical indicators continued retreating from overbought readings, maintaining their downward slopes but above their midlines. In the 4 hours chart, however, the bearish potential is stronger, as technical indicators head firmly south well into negative ground, while the 20 SMA began turning lower above the current level.
Support levels: 107.45 107.10 106.80
Resistance levels: 107.80 108.15 108.40
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