USD/JPY Forecast: Price action looks to risk trends… and Wuhan
|- USD/JPY looks to regain the key 110.00 mark on Friday.
- Headlines around the coronavirus continue to drive sentiment.
- Better mood in the risk complex pushes yields and the spot higher.
The recent decline in USD/JPY appears to have met contention in the 109.30/25 band so far (Thursday), area coincident with the 38.2% Fibo retracement of the January rally.
The demand for the Japanese safe haven has ebbed in past hours, particularly after the World Health Organization (WHO) did not declare any global alarm despite the persistent spread of the Wuhan coronavirus. Investors’ worries about the impact of the coronavirus on the global growth prospects found the WHO statement as encouraging, sparking a bout of selling interest in the yen and therefore underpinning the daily correction higher in the spot.
In addition, Friday’s risk-on sentiment appears supported by better-than-expected results from advanced PMIs in the core euro area, lifting yields and lending extra oxygen to the move higher in the pair.
Short-term technical outlook
USD/JPY has so far met support around the 21-day SMA and a Fibo retracement in the 109.30 region. In case sellers regain the upper hand, then the 200-day SMA in the mid-108.00s should be the next support of significance prior to a couple of extra Fibo retracements at 109.03 and 108.73. On the upside, as long as the risk appetite continues to improve, the 110.00 mark remains the key magnet for bulls ahead of another test of YTD peaks at 110.30 (January 17th).
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