USD/JPY analysis: bearish breakout imminent

Valeria Bednarik FXStreet

USD/JPY Current price: 110.59

December Tokyo CPI and Industrial Production up next.
Yen advances on risk aversion, as Wall Street faltered to sustain the upward momentum.

The risk aversion environment pushed the Japanese yen higher against its American rival, resulting in the USD/JPY pair losing roughly 100 pips from its Wednesday top at 111.40. The pair's decline was a result of equities falling, following Wednesday's impressive rally, and US Treasury yields which also declined. The yield on the benchmark 10-year Treasury note ticked marginally lower, settling around 2.75%. Japanese housing data released at the beginning of the day was quite disappointing, as Housing Starts were down 0.6% in November from a year earlier and Construction Orders for the same period decreasing by 10.7%. The Japanese calendar will be quite busy during the upcoming Asian session, as the country will release Tokyo December inflation and Industrial Production, alongside with November unemployment data and Retail Trade figures.

The pair is back trading below the 38.2% retracement of the March/October rally at 110.75, the immediate resistance. The short-term picture skews the risk to the downside, as it's far below its 100 and 200 SMA which gain downward traction some 200 pips above the current level, while technical indicators hold into negative ground, although with the Momentum advancing and the RSI directionless at 39. The bearish case will be firmer on a break below 110.13, the multi-month low set this week.

Support levels: 110.40 110.10 109.80

Resistance levels: 110.75 111.20 111.60

View Live Chart for the USD/JPY

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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