USD/JPY analysis: consolidation at lows continues, Fed eyed
|USD/JPY Current price: 108.55
- Risk aversion maintains the yen strong despite increased dollar's demand.
- US Treasury yields ended the week in the red and not far from multi-year lows.
The USD/JPY pair closed the week with modest gains just below 108.60, a strong static resistance level. The dollar was unable to advance against its Japanese rival amid persistent risk aversion keeping the Yen also on demand. The pair was confined a tight 70 pips range throughout the week. US Treasury yields edged lower weekly basis, settling Friday not far above multi-year lows, while Wall Street ended the day in the red, adding pressure on the pair. Japanese Industrial Production rose by 0.6% MoM and declined by 1.1% YoY in April, reaffirming the weakness of the local economy. The country won't release relevant data at the beginning of the week. There's a good chance that the pair will remain ranging until next Wednesday when the US Federal Reserve will unveil its latest monetary policy decision.
From a technical point of view, the pair has made little progress these last few days, contained for a second consecutive week by the 38.2% retracement of the latest daily slide measured between 109.92 and 107.81, at 108.60. In the daily chart, the 20 SMA keeps heading south below the larger ones, currently at 108.95, while technical indicators remain within negative levels, lacking directional strength. In the 4 hours chart, the price settled a few pips above a directionless 20 SMA but remains below the larger ones which retain their bearish strength. Technical indicators in this last time frame lost strength upward after entering positive territory, the Momentum already heading marginally lower and the RSI flat at 54. Overall, the risk remains skewed to the downside, at least as long as the pair remains below the 109.00 figure.
Support levels: 108.30 108.05 107.85
Resistance levels: 108.60 109.00 109.40
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