USD/JPY Forecast: Retreating from critical resistance
|USD/JPY Current Price: 109.50
- Softer-than-expected US employment report helped the yen recover some ground.
- Japan data mixed, continues to indicate moderated economic growth.
- USD/JPY easing, but bearish potential limited, according to intraday technical readings.
The dollar rallied against the JPY throughout the week but was unable to take the 109.70 price zone, where sellers have been aligned since last December, ending Friday little changed around 109.50. The USD/JPY pair traded as high as 109.68, as risk-appetite weighed on the safe-haven yen. Japanese data released at the beginning of the day came in mixed, at November Overall Household Spending, which declined by 2.0%, well below the 2.5% advance expected. The preliminary estimate for the Leading Economic Index for the same month, beat expectations by printing at 90.9, while the Coincident Index came in at 95.1, also above the market’s forecast.
The rally stalled after a softer-than-anticipated US employment report, which led to some losses in Wall Street, and also to a retracement in US government debt yields. The yield on the benchmark 10-year note finished the week at 1.82 after peaking mid-week at 1.87%. Japan will kick-start the week with a holiday, which means there won’t be macroeconomic releases.
USD/JPY short-term technical outlook
The USD/JPY pair’s bullish stance persists, although it’s losing momentum. In the daily chart, the pair is still above all of its moving averages, while the Momentum indicator is barely entering positive levels and the RSI turning lower, currently at around 57. In the shorter term, and according to the 4-hour chart, the bearish potential is limited, as technical indicators are easing from extreme overbought levels, while the pair develops above all of its moving averages. A firmly bullish 20 SMA is crossing above the larger ones. The pair could turn bearish once below 108.90 a critical Fibonacci support level.
Support levels: 109.25 108.90 108.50
Resistance levels: 109.70 110.00 110.40
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