USD/JPY analysis: risk-averse sentiment could keep the yen rallying
|USD/JPY Current price: 111.13
- Sour sentiment favoring additional yen gains this week.
- USD/JPY tested levels below 111.00, following bounce limited.
The Japanese yen closed the week with gains against its American rival, surging by the end of the week on the back of mounting risk aversion. The USD/JPY pair bounced Friday from 110.75, finishing at 111.15. ECB's decision to launch another round of TLTRO sent investors in search of safety Thursday, sentiment later exacerbated by Chinese trade figures, much softer than anticipated. Japan's GDP grew at an annualized rate of 1.9% in the last quarter of 2018, surpassing the market's estimate of 1.8%, although the coincident index of business conditions for January was down 2.7 points, posting its third consecutive decline, suggesting conditions keep weakening. The Eco Watchers survey further supported the yen, bouncing from 45.6 in January to 47.5 in February. Soft US data, prevented the pair from recovering further, as employment numbers kept equities and yields under pressure. Japan will start the week releasing minor money figures and preliminary Machine Tool Orders for February.
The daily chart shows that the pair settled a few pips below its 100 and 200 DMA, both converging at 111.40, providing an immediate resistance, while technical indicators maintain their downward slopes but within positive ground. In the 4 hours chart, technical indicators have bounced modestly from oversold levels, while the pair briefly pierced the 100 SMA, now directionless, before closing a few pips above it, all of which suggest the decline may continue particularly if the pair remains below the mentioned 111.40 resistance.
Support levels: 111.00 110.65 110.30
Resistance levels: 111.40 111.90 112.20
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