USD/JPY analysis: at risk of extending decline

Valeria Bednarik FXStreet

USD/JPY Current price: 112.20

Retracement from yearly high stalled a handful of pips above the 100 DMA.
Fear-related trading overshadowed T-yields when it comes to lead the pair.

The USD/JPY pair settled around 112.20, recovering just modestly on Friday after bottoming at 111.82, its lowest in almost a month. The Japanese currency appreciated ever since the week started, despite US Treasury yields surged to multi-year highs, the greenback couldn't appreciate against its Asian rival, as fears weighed more, spurring demand for the safe-haven yen. The recovery at the end of the week was a result of a more stable market's sentiment, with equities bouncing as US treasury yields closing off their highs. The benchmark yield for the 10-year Treasury note settled at 3.16% after peaking mid-week at 3.26%. In the data front, Japan will kick-start the week revealing Industrial Production data for August.

The pair trades now over 200 pips below the yearly high reached at the beginning of the month, and in the daily chart, is close to its 100 DMA, which lost directional strength and currently stands at 111.50, offering quite a relevant psychological support for the upcoming sessions. Technical indicators in the mentioned chart have stalled their downward moves well into negative territory, now attempting modest recoveries. The pair has spent the last two trading days struggling but failing to overcome the 23.6% retracement of the latest daily decline around 112.45, an immediate resistance. Shorter term, and according to the 4 hours chart, the upward potential seems limited, as the pair is developing below its 100 and 200 SMA, while technical indicators bounced from oversold readings, but remain in negative levels.

Support levels: 111.85 111.50 111.20

Resistance levels: 112.45 112.80 113.10

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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