USD/JPY Analysis: bullish case to persist as long as above 108.40
|USD/JPY Current price: 108.67
- Fading hope for massive stimulus measures weighed on safe-haven yen.
- US anticipated Q2 GDP estimate beat the market’s expectations with 2.1%.
- USD/JPY needs to break above the 109.00 figure to extend gains this week.
The USD/JPY pair has finished the week at 108.66, having spent Friday consolidating gains. The pair soared Thursday, following the ECB’s monetary policy announcement, understood less dovish-than-anticipated by market’s participants, and pushing government bond yields up. On Friday, Japan released Tokyo July inflation at the beginning of the day, which increased by 0.9% YoY, missing the market’s expectations of 1.1%. However, core inflation ex-fresh food rose by more than anticipated, up by 0.9% against the 0.8% expected, and matching June’s reading. The US, on the other hand, released the preliminary estimate of Q2 GDP, which came in better-than-expected at 2.1%, hinting a less aggressive stance from the US Federal Reserve. Yields remained around Thursday’s high, as the news pretty much, confirmed market’s speculations. Japan will start the week publishing June’s Retail Trade figures, with Larger Retailers’ Sales seen down by 0.7% following a 0.5% decline in May.
USD/JPY short-term technical outlook
The USD/JPY pair has closed Friday with a doji, confined to the upper end of the weekly range, although unable to extend gains beyond the 109.00 figure. In the daily chart, the pair offers a neutral-to-positive stance, as it settled above a directionless 20 DMA but holds well below bearish 100 and 200 SMA. Technical indicators in the mentioned chart lack directional strength around their midlines. For the short-term, and according to the 4 hours chart, the pair has chances of testing the said figure, as it holds above all of its moving averages and with the 20 SMA advancing above the larger ones. Technical indicators lack directional strength but stay near overbought readings. Former highs and a critical Fibonacci level at around 108.40 provide an immediate support, with the upward potential to remain in place as long as the pair holds above it.
Support levels: 108.40 108.00 107.65
Resistance levels: 109.00 109.35 109.80
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