USD/JPY Forecast: Bearish case firm in place

Valeria Bednarik FXStreet

USD/JPY Current price: 104.57

Japanese markets will remain closed due to local holidays until next Wednesday.
Broad dollar’s weakness and risk aversion likely to maintain USD/JPY under pressure.
USD/JPY bounced after flirting with July’s low, but the bearish case remains strong.

The USD/JPY plummeted this week to 104.26, flirting with July’s monthly low, to settle in the 104.50 price zone. The broad dollar’s weakness and an uneventful Federal Reserve kept the pair on the bearish path, with the decline exacerbated by the sour tone of equities. On Friday, US Treasury yields ticked higher, limiting the slump, but closed the week little changed and near their lows, another sign of increased demand for safety.

At the end of the week, Japan published August National inflation figures at the beginning of the day, which missed expectations. Annual CPI increased by just 0.2%, while the core reading came in at -0.4% as expected. Japan will be on holidays on Monday and Tuesday, which means there are no macroeconomic data scheduled for release.

USD/JPY short-term technical outlook

The USD/JPY pair posted its lowest daily close since last March and is poised to extend its decline. The daily chart shows that it fell well below all of its moving averages, which offer modest bearish slopes. Technical indicators, in the meantime, head south within negative levels, reflecting the strength of selling interest. In the 4-hour chart, technical indicators recovered sharply from oversold levels but remain within negative levels. The 20 SMA, in the meantime, head firmly lower below the larger ones, currently at around 108.90, providing dynamic resistance.

Support levels: 104.20 103.85 103.40

Resistance levels: 104.90 105.25 105.60

View Live Chart for the USD/JPY

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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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