USD/JPY Forecast: Waiting for fundamental developments, still bullish
|USD/JPY Current price: 108.96
- The positive market mood paused ahead of the ECB announcement.
- The US will release several employment-related reports, relevant ahead of Friday’s NFP.
- USD/JPY battling to retain gains around 109.00, corrective decline linked to caution.
The USD/JPY pair has advanced beyond the 109.00 level for the first time in two months, as risk-on continues to dominate the financial world. Speculative interest paused ahead of the two critical events, the first of which will take place today. The European Central Bank is having a monetary policy meeting and is widely anticipated to announce increase its Pandemic Emergency Purchase Program bond-buying scheme. On Friday, the US will unveil its latest employment figures, in the form of the Nonfarm Payrolls report.
Ahead of the event, US Treasury yields retreated modestly from their recent highs, while equities struggle to post some gains in Europe. Apart from the ECB announcement, the macroeconomic calendar will include multiple US employment-related reports. Initial Jobless Claims are expected to show 1.8 million Americas filled for unemployment and while still negative, the number continues to show signs of improvement. The country will also release Q1 Nonfarm Productivity, foreseen at -2.7%, and the Unit Labor Cost for the same period, expected at 5%.
USD/JPY short-term technical outlook
The USD/JPY pair is battling round 109.00 after hitting 109.16. The 4-hour chart shows that, while the pair is still holding above all of its moving averages, technical indicators are correcting overbought conditions, although far from signalling an upcoming decline. The 20 SMA maintains a strong bullish slope, providing dynamic support around 108.30. The ongoing retracement is related to a cautious stance ahead of the mentioned events rather than linked to upward exhaustion. A cleared picture will likely emerge post-ECB announcement, yet as long as the pair remains above 108.65, the downside potential will remain limited.
Support levels: 108.65 108.25 107.90
Resistance levels: 109.20 109.60 110.00
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