USD/JPY Analysis: risk sentiment keeps favoring the Yen

Valeria Bednarik FXStreet

USD/JPY Current price: 107.86

Wall Street bouncing from intraday lows prevented USD/JPY from collapsing.
BOJ’s Kuroda reiterated the central bank’s willingness to maintain the ultra-loose policy.
USD/JPY bearish, firmer decline expected if below 107.21, last week’s low.

The USD/JPY is finishing Monday with modest gains around 107.85, having topped for the day at 108.06. The dollar started the week extending its Friday’s rally, triggered by speculation of a Fed’s softer approach to rate cuts, although risk aversion took over, weighing more in favor of the Japanese currency. Tensions in the Middle East and the resignation of UK’s Foreign Minister, Sir Alan Duncan, maintained risk-off during the first half of the day, although the market’s sentiment improved in the last trading session, as Wall Street surged, on news US officials are traveling to Beijing next week, to resume trade talks. There were no macroeconomic releases in Japan, although BOJ’s Governor Kuroda spoke in Washington. Among other things, Kuroda reiterated that the central bank “persistently continue with powerful monetary easing,” toward achieving the desired 2.0% inflation target. The Asian macroeconomic calendar will remain empty this Tuesday.

USD/JPY short-term technical outlook

The USD/JPY pair is trading at around the 38.2% retracement of its July’s decline, with the upside limited, despite having advanced for a second consecutive day. The intraday advance stalled right below the 50% retracement of the same slide, where in the 4 hours chart, it also has the 100 SMA and 200 SMA, reinforcing the 108.00 relevance as resistance. Technical indicators have turned lower within negative levels, leaning the risk toward the downside without confirming it. The bearish case will be firmer if the pair loses 107.21, the low set last week.

Support levels: 107.50 107.20 106.75

Resistance levels: 108.00 108.40 108.80

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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