USD/JPY Analysis: yen resumes decline as China fuels risk aversion
|USD/JPY Current price: 105.72
- China steepens the negative sentiment after accusing the US of violating the consensus.
- US Retail Sales could give the greenback a short-lived boost, sentiment to overshadow it all.
- USD/JPY to accelerate its decline on a break below 105.50, the immediate support.
The USD/JPY pair is stable just below the 106.00 figure, although the pair peaked at 106.77, a short-lived spike at the beginning of the European session that can be attributed to thin volumes due to several local holidays.
The Dow Jones Industrial Average lost roughly 800 points Wednesday, the largest one-day drop this year, amid fears of a US recession, with the negative sentiment spreading into Asia and now Europe, playing in favor of the Japanese yen. The negative mood steepened after China stated that the latest US announcement of tariffs, included the delay to December, violates the consensus reached in Osaka.
Japanese data surprised to the upside, although resulted far from encouraging. According to the official announcement, Industrial Production declined by 3.3% MoM in June and by 3.8% YoY, while Capacity Utilization declined by 2.6%, this last, worse than the 0.2% advance expected.
The US will release today July Retail Sales seen up by 0.3% from 0.4% in June. The core reading, Retail Sales Control Group, is seen up by 0.3% vs. the previous 0.7%. The country will also release the usual weekly unemployment figures and some minor regional indexes that have fewer chances of affecting the price.
USD/JPY short-term technical outlook
The pair is gaining short-term bearish traction at the time being, trading near its daily low. In the 4 hours chart, the pair is breaking below its 20 SMA, while technical indicators turned sharply lower, the Momentum still holding above its mid-line, but the RSI already at 45, indicating that further declines are likely. Intraday highs and lows in the 105.50 region, providing an immediate support, with a break below the level opening doors for a steeper decline toward fresh lows below the 105.00 figure.
Support levels: 105.50 105.10 104.85
Resistance levels: 106.05 106.40 106.80
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