USD/JPY analysis: at a brick of breaking lower

USD/JPY Current price: 112.53

The USD/JPY pair closed the week at 112.53, down on broad dollar's weakness, as the DXY sunk to fresh YTD lows on softer-than-expected US inflation figures. The pair traded as low as 112.26, bouncing modestly ahead of the close as US Treasury yields recovered some ground ahead of the closing bell. The 10-year note benchmark fell to 2.29% after settling at 2.32%, still down from previous 2.35%, while the 2-year note yields, the most sensitive to rate moves, fell to its lowest in three weeks. Japan will start the week with a bank holiday, which may result in limited action at the beginning of the week, whilst the BOJ will have its monetary policy meeting on Thursday. Governor Kuroda is not expected to surprise markets, reaffirming the need to maintain easing to achieve a sustainable 2% inflation. Anyway, the pair is a brick of breaking lower, as in the daily chart the price broke below its 200 DMA, while standing barely above the 38.2% retracement of its latest weekly advance, at 112.30. Technical indicators in the same chart have turned strongly lower and are about to cross their mid-lines into negative territory, suggesting that a downward move through the mentioned Fibonacci support should lead to additional losses. In the 4 hours chart, the price settled below the 100 SMA for the first time since mid June, while technical indicators have lost their bearish strength, but remain within negative territory, in line with the longer term perspective.

Support levels: 112.30 111.90 111.60

Resistance levels: 112.80 113.15 113.50

View Live Chart for the USD/JPY

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