USD/JPY analysis: critical support at around 111.50
|USD/JPY Current price: 111.79
- Yen appreciated on risk aversion, holding on to gains post-US weak retail sales.
- Lower lows daily basis maintain the risk skewed to the downside, poised to test 100 DMA.
The USD/JPY pair fell to a fresh 1-month low of 111.62 as risk aversion dominated the first half of the day, ending it some 20 pips above the level, as poor US data and broad dollar's weakness prevented the pair from recovering ground, despite a better market mood later in the day. Japanese data released at the beginning of the day failed to impress as Industrial Production rose 0.2% MoM in August, after a 5.3% increase in July, while it came in up by 0.2% when compared to a year earlier. Capacity Utilization in the same month rose a healthy 2.2%, up from -0.6% in the previous month. Japan has no macroeconomic news scheduled for this Tuesday. US Treasury yields, meanwhile, offered little clues, with no relevant changes in the bond market.
From a technical point of view, and according to the 4 hours chart, the pair is bearish, as it further fell below its 100 and 200 SMA, both lacking directional strength well above the current level, while technical indicators have managed to correct partially from their daily lows, but have lost directional strength, settling well into the red. A key support for the upcoming sessions is the 100 DMA, which stands a few pips below the daily low, around 111.50, providing a strong dynamic support that once broken, should lead to a steeper decline during the upcoming sessions.
Support levels: 111.50 111.20 110.85
Resistance levels: 111.90 112.25 112.60
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