USD/JPY Analysis: bears ready to take down the 105.00 mark
|USD/JPY Current price: 105.20
- Japanese inflation at factory levels fell by 0.6% YoY in July.
- US annual inflation seen upwardly revised to 1.7% YoY.
- USD/JPY aiming to extend its decline toward the 104.20/30 price zone.
The USD/JPY pair has reached a daily high of 105.58 during Asian trading hours, resuming its decline as Europe came in, on the back of risk aversion. Bond yields continue to fall, with negative yields spreading throughout the Union, and that of the US 10-year Treasury note down to 1.62%. Equities, in the meantime, follow the lead of Wall Street, with all local indexes trading in the red.
The dismal market mood is a combination of trade tensions between the US and China generating a global economic slowdown, rising odds for a hard-Brexit, and worldwide central banks responding to the ongoing uncertainty with more stimulus measures.
Overnight, Japan released the Domestic Corporate Goods Price Index, which remained flat monthly basis in July, and declined by 0.6% when compared to a year earlier, missing the market’s expectations. The Tertiary Industry Index fell in June by 0.1% as expected. The US will publish today the final version of July inflation, seen up by 1.7% YoY vs. the previous estimate of 1.6%. Core CPI is foreseen steady at 2.1%.
USD/JPY short-term technical outlook
The USD/JPY pair held so far above Monday’s multi-month low of 105.04, but trades a few pips above it, maintaining the negative bias according to intraday readings. As said in previous updates, the pair has a long-term support in the 104.20/30 region, and a possible bearish target should the decline extend below the 105.00 figure. In the 4 hours chart, the 20 SMA keeps limiting the upside by heading lower above the current level, and far below the larger ones. Technical indicators in the mentioned chart have resumed their declines within negative levels, although their bearish momentum is limited at the time being. The pair could correct higher if it manages to recover above 105.60, the immediate resistance.
Support levels: 105.00 104.75 104.30
Resistance levels: 105.60 106.00 106.40
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