USD/JPY analysis: at a brink of turning bearish
|USD/JPY Current price: 108.41
- US Treasury yields reached a three-week high, retreated with Powell.
- Japanese data continued disappointing, with more signs of slowing economic growth.
- USD/JPY to turn short-term bearish on a downward acceleration through 108.35 support.
After flirting with the 109.00 figure, the USD/JPY is ending the day lower at around 108.40, as dollar’s bulls gave up, following a more dovish-than-anticipated Fed’s Chief Powell. In his testimony before a special committee, the leader of the US Central Bank left doors open for more than one rate cut this year, as policymakers suspect inflation will take longer to recover, while the economic outlook continues to be affected by trade jitters.
US Treasury yields leading the way
US Treasury yields soared ahead of Powell, with the yield on the benchmark 10-year note hitting a three-week high of 2.11%, later retreating to 2.06%, affecting the pair just modestly. The decline was tempered by soaring equities, as Wall Street neared its recent record highs. From a macroeconomic point of view, Japanese data keeps disappointing, as the country released at the beginning of the day the June Domestic Corporate Goods Price Index, which declined by 0.5%MoM and by 0.1% YoY, missing the market’s expectations. This Thursday, the country will release the June Tertiary Industry Index, seen declining 0.1% MoM.
USD/JPY short-term technical outlook
The USD/JPY pair bounced just modestly from a daily low of 108.34, losing the positive momentum seen earlier this week, with further declines likely for this Thursday on renewed selling pressure below the mentioned low. In the 4 hours chart, the pair has found support around the 200 SMA but remains below the 20 SMA, while technical indicators have entered negative territory, the Momentum heading south and the RSI flat at around 47. The downward pressure could ease on a recovery above 108.70, which will depend on how government bond yields develop from now on.
Support levels: 108.35 108.00 107.65
Resistance levels: 108.70 109.00 109.40
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