USD/JPY analysis: nearing key dynamic support at 112.40

Valeria Bednarik FXStreet

USD/JPY Current price: 112.72

US Treasury yields trimmed half of last week's gains, backing yen's advance.
Break below 100 DMA exposes October low at 111.37.

The USD/JPY pair broke below the 113.00 level amid risk aversion dominating the financial world at the beginning of the week ending the day around 112.70. Fears about a global economic slowdown weighed on high-yielding assets, benefiting the safe-haven yen. US Treasury yields gave back some of the ground gained last week, the yield on the benchmark 10-year Treasury note slipping to 2.85%, also affected by speculation the US Federal Reverse, scheduled to meet later this week, will announce a pause in its rate hike cycle. US indexes followed the lead of their European counterparts, starting the session sharply lower, although bouncing afterward, preventing the USD/JPY pair from falling further. In the data front, Japan has little to offer this week, with the upcoming most relevant event being Trade Balance data next Wednesday.

The pair has trimmed most of the past week's gains, and trades not far from the 100 DMA, which stands at 112.40, offering an immediate and relevant support as the indicator has rejected attempts to break lower ever since late August. Below this last, there's little relevant in the way to October low at 111.37. Shorter term, and according to the 4 hours chart, the risk is skewed to the downside as the pair keeps pressuring its daily lows now developing some 50 pips below its 100 and 200 SMA, both converging directionless, as technical indicators near oversold readings with strong bearish slopes.

Support levels: 112.40 112.05 111.60

Resistance levels: 113.00 113.35 113.70

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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