USD/JPY analysis: bearish trend prevails

USD/JPY Current price: 106.47

  • A political scandal in Japan may end with Aso resigning.
  • USD/JPY waiting for US inflation for direction.

The Japanese yen found market's favor ever since the day started amid its safe-haven conditions, backed by different factors through the day. During Asian trading hours, news that PM Abe is suspected to be involved in a political scandal related to the sale of state-owned land for a ridiculously low price sent the USD/JPY pair to a daily low of 106.35. The scandal also affects FM Aso, who admitted that documents related to the sale were altered, to remove the names of multiple politicians, including Abe's wife. Aso may resign and the political uncertainty generated boosts demand for the local currency. In the US session, Treasury yields ticked modestly lower after an auction, while equities fell after a strong start to the day, maintaining the pair under pressure. Japan is scheduled to release its Domestic Corporate Goods Price Index for February during the upcoming Asian session, expected below previous readings, which will further cold down expectations of higher inflation, while later on the day, the country will release its Tertiary Industry Index for the same month. More relevant will be US CPI coming on Tuesday. Now trading near its daily low, the pair is biased lower according to technical readings in the 4 hours chart, mostly due to its failure to settle above the 107.00 level. In the mentioned chart, the pair is now battling below a horizontal 100 SMA, and far below the 200 SMA, while technical indicators head south within positive territory and nearing their mid-lines. A break below the daily low of 106.35 is required to confirm a bearish extension for this Tuesday.

Support levels: 106.35 106.00 105.70

Resistance levels: 107.10 107.45 107.80

View Live Chart for the USD/JPY

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