USD/JPY analysis: yen's strength to persist

Valeria Bednarik FXStreet

USD/JPY Current price: 114.44

The USD/JPY pair closed the week sharply lower at 114.44, the largest weekly decline since mid July 2016, as confidence in the US future economic growth kept decreasing, following Trump's press conference. Better-than-expected data coming from Japan, as the Leading Economic Index rose to 102.7 in November from previous 100.8, was not enough to offsets concerns about a stronger yen, as if the currency keeps appreciating, the BOJ will have to take additional easing steps. The pair closed in the red on Friday, despite US inflation, in the form of PPI, came in better-than-expected, and that US Treasury yields recovered from the multi-month lows seen earlier in the week, indicating that further declines are likely for the upcoming days. From a technical point of view, the daily chart shows that the price has retraced just the 23.6% of its latest bullish run, but also that it stands a few pips above 114.00, the 23.6% retracement of the 2011/2015 rally, with renewed selling pressure below this last probably resulting in a steeper slide. In the same chart, technical indicators head sharply lower within negative territory, while a bullish 100 DMA stands around 109.10, too far away to be relevant as support. Shorter term, technical readings in the 4 hours chart favor a bearish extension, given that indicators head south within negative territory, whilst the price remains far below its 100 and 200 SMAs, with the shortest gaining downward strength for the first time in over three months.

Support levels: 114.00 113.65 113.20

Resistance levels: 114.70 115.20 115.60

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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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