USD/JPY analysis: yen poised to extend its advance
|USD/JPY Current price: 109.91
- Japanese data limits yen's gains but run to safety will likely continue.
- US Treasury yields and Wall Street led the way lower for USD/JPY.
The USD/JPY pair fell to its lowest in over a month, reaching 109.73 amid resurgent demand for safe-haven assets. Dismal European data was the catalyst that triggered the run to safety, lately exacerbated by the behavior of US Treasury yields, as the curve inverted for the first time since 2007, with the yield on the 3-month Treasury bill hitting 2.459% while the yield on the 10-year Treasury note touched 2.437%, triggering alerts about a possible recession coming to the US. Adding fuel to the fire, Wall Street collapsed, with the 3 major indexes posting their largest intraday decline since early January. Japanese data released lately has been far from encouraging, preventing the pair from falling further, and increasing odds of an upcoming bounce. Japan will release the January All Industry Activity Index at the beginning of the week, seen at 0.2% vs. the previous -0.4%.
The USD/JPY pair bearish case is strong, according to the daily chart, as the pair fell roughly 150 pips below its 100 and 200 DMA, after spending pretty much two weeks struggling around them. Technical indicators in the mentioned chart head firmly lower within negative levels and nearing oversold readings with no signs of changing course. In the shorter term, and according to the 4 hours chart, the pair shed over 100 pips after failing to surpass its 200 DMA, currently around 110.90, while the 100 DMA turned lower far above the longer one. The Momentum indicator stalled at oversold levels, while the RSI indicator keeps heading south, currently at 23, both adding to the bearish case.
Support levels: 109.70 109.30 109.00
Resistance levels: 110.25 110.60 110.95
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