USD/JPY Analysis: dollar retains post-Powell’s weakness
|USD/JPY Current price: 108.18
- Japanese industrial-related data continued indicating a steeper economic slowdown.
- The US will release today the final version of June inflation, with core CPI seen at 2.0% YoY.
- USD/JPY has broken below the 108.60/70 price zone, which increases the risk of a bearish extension.
The USD/JPY pair has extended its decline to 107.85 amid persistent dollar’s weakness following Fed’s Chief Powell testimony, recovering from such low just modestly, now trading a few pips above the 108.00 figure. The greenback remains under pressure against all of its major rivals, as the Federal Reserve´s leader spoke about a dim economic outlook. On the other hand, speculation that more monetary easing is coming in the US sent Wall Street up, recovering most of the ground lost following the release of the NFP report earlier this month, with the three major indexes flirting with record highs, despite mounting fears about a global economic downturn as a result of US President Trump protectionism policies. US Treasury yields in the meantime, retreated further, now hovering around the weekly opening levels.
Japan released overnight the June Tertiary Industry Index, which fell by 0.2%, worse than the -0.1% forecast and the previous 0.8% gain. As it has been happening for months, Japanese industry-related data has disappointed, indicating shrinking activity in the sector. The bad news exacerbate speculation of an economic slowdown in the country and usually result in a stronger yen, amid increased demand for the safe-haven currency. The US will release today weekly unemployment claims and June inflation data, with the core yearly CPI seen steady at 2.0%. Given Powell’s words from Wednesday, a worse-than-anticipated outcome should exacerbate dollar’s selling.
USD/JPY short-term technical outlook
The USD/JPY pair is at risk of falling further according to intraday technical readings, moreover after falling below the 108.60/70 price zone. The 4 hours chart shows that the pair is bouncing from a flat 100 SMA, but also that it remains below the 20 and 200 SMA. Technical indicators are recovering from near oversold readings, but remain well into negative ground, falling short of indicating that the pair has reached a bottom. The pair would resume its advance if it surpasses the mentioned 108.60/70 region, quite unlikely in the current fundamental scenario. Bears, on the other hand, will become more aggressive on a break below 107.70, the immediate support.
Support levels: 107.70 107.25 106.90
Resistance levels: 108.30 108.65 109.00
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