USD/JPY Analysis: sentiment may have improved, bur risk-off rules
|USD/JPY Current price: 106.44
- The positive tone of equities and a bounce in government bond yields keeping the pair afloat.
- FOMC Meeting Minutes expected to have a limited impact ahead of Jackson Hole.
- USD/JPY to resume its decline on a break below 106.05, a Fibonacci support.
The USD/JPY pair is trading lifeless in a 50 pips’ range just below a critical Fibonacci resistance ever since the week started, as, despite some back and forth in the market’s sentiment, safe-haven assets continue to be demanded in an uncertain environment. This Wednesday, equities are performing better in Europe, pushing US futures up ahead of the opening. Government bond yields ticked higher, although the yield for the benchmark 10-year Treasury note is at 1.58% up from a monthly low of 1.47% but well below the 2.06% it hit at the beginning of August.
Japan didn’t release relevant data this Wednesday, which exacerbated the quietness around the pair. The market is now waiting for the release of the FOMC Meeting’s Minutes. The statement is usually scrutinized in search of clues about the future of the monetary policy. This time, the document may have a limited effect on the dollar, as the meeting took place before the latest escalation of the trade war, which is among US policymakers major concerns, and also below some encouraging data released last week, included upbeat Retail Sales. Furthermore, Fed’s head, Jerome Powell is scheduled to speak this Friday within the Jackson Hole Symposium and will probably provide more updated cues.
USD/JPY short-term technical outlook
The USD/JPY pair is technically neutral, according to the 4 hours chart, as it’s stuck between the 20 and 100 SMA, with the largest maintaining its downward slope just above the current level. Technical indicators hover just above their midlines, without directional strength. The 106.65 price zone, where it has the 38.2% retracement of its latest daily decline, has capped advances since the week started, quite a relevant resistance. The 23.6% retracement of the same slide comes at 106.05, providing support.
Support levels: 106.05 105.60 105.25
Resistance levels: 106.65 106.95 107.20
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