USD/JPY Analysis: bears pausing, still in control
|USD/JPY Current price: 107.66
- Japanese National Inflation steady at 0.7%YoY in June.
- US Michigan Consumer Sentiment Index expected at 98.5 in July.
- USD/JPY corrective advance falling short of signaling an interim bottom in place.
The greenback recovered in Asia, roughly half the ground lost following Fed Williams’ comments. The head of the New York Central Bank said that policymakers need to act forcefully when rates are low and economic growth is slowing, and that is better to take “preventative measures than to wait for disaster to unfold.” The greenback tumbled with his words, hinting more aggressive rate cuts ahead, and sending the USD/JPY pair down to 107.21, a fresh July low. The following recovery came as the NY Fed quickly clarified that the speech was not about potential policy action by the Fed, but an academic speech on 20 years of research, with the pair now trading around 107.65.
US Treasury yields, however, bounced just modestly from two-week lows, as geopolitical tensions between the US and Iran, and the lack of progress in trade negotiations between the US and China, back demand for safe-haven assets.
Japan released National inflation data at the beginning of the day, which rose in June 0.7% YoY as expected, although the core reading, which excludes volatile food and energy prices, resulted in 0.5%, below the market’s forecast of 0.6%. The US session will bring the preliminary estimate of the July Michigan Consumer Sentiment Index, foreseen at 98.5 vs. the previous 98.2.
USD/JPY short-term technical outlook
The USD/JPY pair is currently hovering around the 23.6% retracement of its July’s decline, with the ongoing recovery far from signaling potential further gains. In the 4 hours chart, the pair remains below all of its moving averages, with the 20 SMA heading south below the larger ones, and close to the 38.2% retracement of the same slide at 107.90, the immediate resistance. Technical indicators in the mentioned chart have recovered from oversold readings but already lost strength upward well into negative territory. The pair would have more chances of recovering ground if it manages to recover the 108.00 area, where it met sellers a couple of times in the past sessions.
Support levels: 107.50 107.15 106.75
Resistance levels: 108.00 108.40 108.80
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