USD/JPY Analysis: Corrective slide to continue on sentiment
|USD/JPY Current Price: 108.40
- Japanese Trade Balance seen posting an adjusted deficit of ¥-229.7B in September.
- BOJ’s Kuroda open to keep cutting rates if needed to ease monetary policy.
- USD/JPY at risk of falling further only if it breaks below 108.00.
The USD/JPY pair closed the week at around 108.40, down Friday for a third consecutive day as the American currency remained under selling pressure. Brexit hopes kept high-yielding currencies strengthening, in detriment of the greenback, this last also undermined by dismal US data. USD/JPY decline was limited by US Treasury yields, which held on to the higher end of their weekly range, and despite the sour tone of Wall Street. US equities were down amid disappointing earnings reports.
During the weekend, Bank of Japan Governor Kuroda hit the wires and said the BOJ would “certainly” reduce short- to medium-term interest rates if it needed to ease monetary policy, in line with the market’s expectation that the central bank will sooner than later add to its massive stimulus program. Early Monday, the country will release September Trade Balance. The market’s forecast points to an adjusted deficit of ¥-229.7B. Imports are seen down 2.8%, while exports are expected to have fallen by 4.0%.
USD/JPY short-term technical outlook
The USD/JPY pair has settled a few pips above the 23.6% retracement of its latest daily advance, which limits the chances of a bearish extension. Brexit noise could trigger a run to safety, in which case, the market will be looking at the price´s behavior around the 38.2% retracement of the same rally at 108.00. Meanwhile, the daily chart shows that the pair was unable to surpass its 200 DMA, but it holds above the shorter ones. Technical indicators have eased, retaining their bearish slopes within positive levels. In the 4-hour chart, readings favor a downward extension, as the pair has settled below a now flat 20 SMA, while technical indicators head south within negative levels.
Support levels: 108.00 107.70 107.30
Resistance levels: 108.65 109.00 109.35
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