USD/JPY Analysis: dollar retains post-Powell’s weakness

Valeria Bednarik FXStreet

USD/JPY Current price: 108.18

Japanese industrial-related data continued indicating a steeper economic slowdown.
The US will release today the final version of June inflation, with core CPI seen at 2.0% YoY.
USD/JPY has broken below the 108.60/70 price zone, which increases the risk of a bearish extension.

The USD/JPY pair has extended its decline to 107.85 amid persistent dollar’s weakness following Fed’s Chief Powell testimony, recovering from such low just modestly, now trading a few pips above the 108.00 figure. The greenback remains under pressure against all of its major rivals, as the Federal Reserve´s leader spoke about a dim economic outlook. On the other hand, speculation that more monetary easing is coming in the US sent Wall Street up, recovering most of the ground lost following the release of the NFP report earlier this month, with the three major indexes flirting with record highs, despite mounting fears about a global economic downturn as a result of US President Trump protectionism policies. US Treasury yields in the meantime, retreated further, now hovering around the weekly opening levels.

Japan released overnight the June Tertiary Industry Index, which fell by 0.2%, worse than the -0.1% forecast and the previous 0.8% gain. As it has been happening for months, Japanese industry-related data has disappointed, indicating shrinking activity in the sector. The bad news exacerbate speculation of an economic slowdown in the country and usually result in a stronger yen, amid increased demand for the safe-haven currency. The US will release today weekly unemployment claims and June inflation data, with the core yearly CPI seen steady at 2.0%. Given Powell’s words from Wednesday, a worse-than-anticipated outcome should exacerbate dollar’s selling.

USD/JPY short-term technical outlook

The USD/JPY pair is at risk of falling further according to intraday technical readings, moreover after falling below the 108.60/70 price zone. The 4 hours chart shows that the pair is bouncing from a flat 100 SMA, but also that it remains below the 20 and 200 SMA. Technical indicators are recovering from near oversold readings, but remain well into negative ground, falling short of indicating that the pair has reached a bottom. The pair would resume its advance if it surpasses the mentioned 108.60/70 region, quite unlikely in the current fundamental scenario. Bears, on the other hand, will become more aggressive on a break below 107.70, the immediate support.

Support levels: 107.70 107.25 106.90

Resistance levels: 108.30 108.65 109.00

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.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.