USD/JPY outlook: Yen rises sharply as new virus variant sparks strong risk aversion
|USD/JPY
The USDJPY collapsed in early Friday trading after news about new virus variant sparked sharp migration into safety.
The pair was down 1.2% in Asia and early Europe, making so far the biggest drop this year.
Fresh bearish acceleration weakened near-term structure, as daily studies show sharp loss of positive momentum, while stochastic reversed from overbought territory and heading south and the price fell below 5/10/20 DMA’s. Bears cracked initial Fibo support at 114.00 (23.6% of 109.11/115.51, unmasking key supports at 113.07 (Fibo 38.2%) and 112.72 (Nov 9 trough), break of which would generate reversal signal and further boost fresh bears.
Weekly chart shows long upper shadows on this and previous week’s candles that, in addition to recent multiple upside rejections, suggests that larger bulls may be running out of steam.
Weekly close below 114.00 Fibo level is seen as initial requirement to keep fresh bears in play, with the situation likely to be boosted by rising uncertainty about the new virus variant.
This would also partially offset dollar’s positive stance on expectations of Fed accelerating stimulus tapering and earlier than expected rate hike.
Res: 114.60; 115.00; 115.36; 115.51.
Sup: 113.65; 113.07; 112.72; 112.31.
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