USD/JPY analysis: depressed on persistent risk aversion

USD/JPY Current price: 110.92

  • Japanese economic growth bounced nicely in the second quarter of the year.
  • Yen unable to offset demand for the greenback amid Fed's leadership.

The Japanese yen advanced just modestly against its American rival in the last trading day of the week, with the USD/JPY pair trapped between yen´s safe-haven condition and broad dollar's strength. The pair fell to 110.50, its lowest in two weeks, to close at 110.92, little changed for a third consecutive week. Equities and US Treasury yields came under strong selling pressure in the risk-averse environment triggered by ECB's concerns about local banks' exposure to Turkey, with the yield on the benchmark 10-year Treasury note falling to 2.85%, to close the day at 2.87%. Japanese data released early Friday was generally encouraging as preliminary Q2 GDP beat market's forecast of 0.3% by printing 0.5%, a nice recovery from the previous quarter 0.2% decline. Additionally, July Domestic Corporate Goods Price Index was up 3.1% YoY, better than the 2.9% expected, and a modest sign of increasing inflationary pressures. There won't be macroeconomic releases in Japan until next Tuesday. Technically, the risk for the pair is leaned to the downside, although the bearish potential is limited, given that in the daily chart, it keeps holding above its 100 and 200 SMA, with the shortest heading north above the larger one. In the mentioned chart, the Momentum indicator stands pat around its mid-line, while the RSI gains downward traction at around 44. In the shorter term, and according to the 4 hours chart, the pair offers a neutral-to-bearish stance, as it is developing below its 100 and 200 SMA, with the shortest crossing below the larger one and both in the 111.30/40 region, while technical indicators recovered, heading up right below their midlines.

Support levels: 110.50 110.20 109.80

Resistance levels: 111.30 111.60 111.90

View Live Chart for the USD/JPY

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