USD/JPY Forecast: At risk of extending its slide amid risk-off
|USD/JPY Current Price: 109.78
- Mixed US data released on Friday kept the pair afloat.
- Japanese economy seen contracting 0.9% in the three months to December.
- USD/JPY consolidating but dismal market’s mood skews the scale to the downside.
The USD/JPY pair consolidated on Friday to close the day and the week little changed at 109.78. The Japanese currency got some market’s favour on Thursday after revived coronavirus concerns, offset later by the better performance of equities. Unimpressive US data released at the end of the week was enough to keep the pair afloat, although US Treasury yields closed the week with a weak note, somehow anticipating upcoming demand for safe-haven assets.
Meanwhile, the coronavirus outbreak continues spreading. News on Sunday indicated that the death toll is now around 1,700 while the number of cases is above 66,000. Most cases remain in mainland China, but the first death was reported in Europe. The market may have priced in that the outbreak has not reached its peak, but is unaware of how it would end up affecting economic growth, which increases odds of a sudden demand for safety. Japan will release its Q4 GDP this Monday, with the economy seen contracting 0.9% in the three months to December. It will also publish Industrial Production and Capacity Utilization for December.
USD/JPY short-term technical outlook
The daily chart for the USD/JPY pair shows that the pair continues to develop above all of its moving averages, although the 20 DMA remains directionless. The Momentum indicator heads north within positive levels while the RSI eases toward its mid-line, all of which suggest decreasing bullish potential. In the short-term and according to the 4-hour chart, the pair is neutral-to-bearish as it has spent the last few sessions consolidating just below its 20 SMA, while the larger one lack directional strength and converge around 109.40, providing support. Technical indicators hover within negative levels, reaffirming the bearish case without confirming it.
Support levels: 109.40 109.00 108.65
Resistance levels: 110.00 110.35 110.70
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