USD/JPY Analysis: risk sentiment skews the pair to the downside
|USD/JPY Current price: 107.93
- Political and economic turmoil in Europe weighed on the market’s sentiment.
- US Retail Sales seen posting a modest advance in June.
- USD/JPY to resume its decline if the 107.70 support gives up.
Risk aversion is dominating the FX board today amid renewed trade tensions between the US and China, and turmoil in the Old Continent. The EUR is being pressured by comments from ECB’s Villeroy, who said that monetary policy cannot do miracles and repair protectionism damage, also by the German ZEW survey showed that Business Sentiment continues on the back foot. The Pound collapsed despite strong employment data, as fears of a hard Brexit weighed more. The greenback advances due to safe-haven condition, but given that the Yen is also considered a refuge, the USD/JPY pair stands within familiar levels, with a short-term neutral-to-bearish stance.
Japan didn’t release relevant data this Tuesday, with the market now focused on the US Retail Sales to be out ahead of Wall Street’s opening, and Fed’s Chief Powell speech later in the day. Sales are foreseen up by a modest 0.1% in June, after advancing by 0.5% in the previous month. The core Retail Sales Control group is expected at 0.3% following a downwardly revised 0.4% in the previous month. The country will also release June Industrial Production and Capacity Utilization for the same month, and May’s TIC Flows.
USD/JPY short-term technical outlook
The USD/JPY pair advanced during Asian trading hours to 108.09, from where it retreated to the current 107.90 price zone, flat for the day and the week. In the 4 hours chart, the pair continues developing below all of its moving averages, which lack directional strength and are confined to a tight 20 pips’ range, reflecting the lack of a clear directional trend. Technical indicators in the mentioned chart hold within negative levels, with uneven directional strength, falling short of confirming an upcoming slide. A bearish continuation is likely on a break below 107.70, the immediate support, with speculative interest then aiming to re-test the multi-month low set late June at 106.77.
Support levels: 107.70 107.25 106.90
Resistance levels: 108.10 108.45 108.80
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