USD/JPY Analysis: trapped within familiar levels

Valeria Bednarik FXStreet

USD/JPY Current price: 106.36

The Japanese August Nikkei Manufacturing PMI came in at 49.4, missing the market’s expectations.
US preliminary August Markit PMI seen posting modest monthly recoveries.
USD/JPY needs to lose 106.05 to resume its decline, 105.50 coming then at sight.

USD/JPY advance stalled at 106.64, so far the daily high, with the pair now trading at around 106.30. The American dollar found some modest demand following the release of the FOMC Meeting’s Minutes, although the document showed that policymakers were divided about the rate cut. Also, the statement indicated that the rate cut was a “mid-cycle adjustment,” that should not be seen as an indication of a pre-set course of action.

News coming from Japan were no good, as the August preliminary Nikkei Manufacturing PMI came in at 49.5, better than the previous 49.4 although below the market’s forecast of 49.8. Furthermore, June All Industry Activity Index declined by 0.8% when compared to the previous month, worse than the -0.7% anticipated. The US session will bring the preliminary estimates of the Markit PMI for August, seen posting a modest monthly bounce.

USD/JPY short-term technical outlook

The USD/JPY pair is trading within familiar levels for a sixth consecutive day, unable to advance beyond 106.65, the 38.2% retracement of its latest daily decline by holding above 106.05, the 23.6% retracement of the same slide. In the 4 hours chart, technical readings skew the risk to the downside, as the pair is now developing below its 20 and 100 SMA, both converging a handful of pips above the current level, while technical indicators stand within negative levels, without directional strength. The pair would need to leave the mentioned range to gain some directional traction, although it would require a strong catalyst to maintain the momentum.

Support levels: 106.05 105.60 105.25

Resistance levels: 106.65 106.95 107.20

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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