USD/JPY analysis: lacking direction, but bearish risk as long as below 109.00/30

USD/JPY Current price: 108.54

  • Japan starts the week with a holiday, thin volumes expected.
  • Risk aversion keeps the pair neutral as both currencies are perceived as safe-havens.

The USD/JPY pair closed the week as it started, unchanged in the 108.50 price zone after a modest advance Friday. Japanese data released at the end of the week weighed on the local currency, as Overall Household Spending posted a larger-than-expected decline in November, falling by 0.6%, while the Eco Watchers Survey indicated decreasing confidence in local businesses, with the assessment of the current situation down to 48.0 from 51.0, and the outlook shrinking to 48.5 from 52.2. Steady US inflation also helped the pair, despite the soft tone of equities and government bond yields. Japan will celebrate a holiday this Monday, with thin volumes expected in the upcoming Asian session.

Technically, the daily chart shows that the pair settled above the 50% retracement of its 111.41/105.15 decline, the immediate support at 108.30. The 61.8% retracement of the same slump comes at around 109.05, a level that the pair tested but was unable to break these last few days. Technical indicators have lost directional strength within negative levels and after correcting extreme oversold readings, while the price is over 30 pips below its 100 and 200 SMA, indicating that bears maintain control of the pair. Shorter term, and according to the 4 hours chart, the pair offers a neutral stance, as the Momentum indicator heads higher around its mid-line, the RSI consolidates around 53, while moving averages maintain their strong bearish slopes well above the current level.

Support levels: 108.30 108.00 107.55  

Resistance levels: 108.60 109.05 109.30  

View Live Chart for the USD/JPY

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