USD/JPY Analysis: holding ground, bullish
|USD/JPY Current Price: 106.92
- Japanese Q2 GDP up next, growth expected to remain sluggish.
- Safe-haven assets under pressure amid hopes for a delay in Brexit, US-China talks.
- USD/JPY holding around the 50% retracement of August slide, could extend its advance.
The USD/JPY pair has advanced for a second consecutive week, ending it around 106.90, its highest in over a month. The pair surged alongside renewed hopes the US and China will resume trade talks, boosting sentiment and weighing down safe-haven assets. The rally failed to continue by the end of the week, as dollar bulls were unimpressed by a mixed August employment report. Wall Street closed mixed on Friday, although firmly higher for the week, a scenario replicated by government bond yields. In the data front, Japan released the preliminary estimate of the July Leading Economic Index, which came in at 93.6, while the same estimate for the Coincident Index resulted at 99.8. These numbers hint that the economy continues to underperform heading into the third quarter of the year.
With the weekly opening, the country will release its Q2 Gross Domestic Product, foreseen at 0.3% from the previous 0.4%, which will confirm prevalent sluggish growth. Japan will also unveil its July Trade Balance.
USD/JPY short-term technical outlook
The USD/JPY pair settled around the 50% retracement of its August decline, offering a neutral stance in its daily chart, as technical indicators are hovering around their midlines without clear directional strength. In the same chart, the 20 DMA aims marginally higher around the 38.2% retracement of the same slide at 106.30, while the 100 and 200 SMA continue heading south far above the current level. In the shorter term, and according to the 4 hours chart, the risk remains skewed to the upside, as the pair is developing above all of its moving averages, while technical indicators retreated from overbought reading but are currently trying to regain the upside within positive levels.
Support levels: 106.65 106.30 105.90
Resistance levels: 107.10 107.45 107.80
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