USD/JPY Forecast: Dollar recovers as sentiment takes a turn to the worse
|USD/JPY Current price: 107.79
- Japan’s Merchandise Trade Balance posted a deficit of ¥930.4B in April.
- US Jobless Claims seen at 2.4 million in the week ended May 15.
- USD/JPY holding on to gains could accelerate its advance once above 108.08.
The greenback is recovering some ground across the board, with USD/JPY trading around 107.80, as the market sentiment deteriorates. Late Wednesday, the WHO reported that there were over 100K coronavirus cases in the last 24 hours, the largest one-day jump, although centred in the Americas. Just in the US, there were over 45K new cases, despite the country is believed to have passed the peak and it’s in the process of reopening its economy.
Meanwhile, tensions between the US and China continue to escalate, amid the first blaming Beijing for the coronavirus pandemic. Stocks trade in the red in Asia and Europe, anticipating a soft start to the day for Wall Street.
Overnight, Japan released the April Merchandise Trade Balance, which came in at ¥-930.4B much worse than anticipated. Exports were down by 21.9% while imports decreased by 7.2%. The preliminary estimate of the Jibun Bank Manufacturing PMI came in at 38.4 in May after printing at 41.9 in April.
The US session will bring Initial Jobless Claims for the week ended May 15, foreseen at 2.4 million, and the preliminary estimates of Markit PMIs for May. Both, Services and Manufacturing output are expected to have bounced, but also to remain well into contraction territory.
USD/JPY short-term technical outlook
The USD/JPY pair has recovered from the 107.30 support area, where it bottomed late Wednesday, providing additional relevance to the support. Bears could take their chances if the pair breaks below the level. In the meantime, the short-term picture shows that there are little chances of that happening as the pair is developing above all of its moving averages, and with the 20 SMA maintaining its bullish slope above the larger ones. Technical indicators lack directional strength but hold above their midlines. Another leg higher could be expected on a break above 108.08, the weekly high.
Support levels: 107.30 106.90 106.65
Resistance levels: 108.10 108.45 108.80
View Live Chart for the USD/JPY
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