USD/JPY Forecast: Bouncing from the 104.00 threshold, bullish potential limited

USD/JPY Current price: 104.65

  • The Bank of Japan left its monetary policy unchanged and downgraded growth and inflation forecasts.
  • Japan will publish October Tokyo inflation and the preliminary estimate of September Industrial Production.
  • USD/JPY bounced sharply from around 104.00 but is still not out of the woods.

The USD/JPY pair bounced sharply after trading as low as 104.02, currently at around 104.70. The pair got a modest boost during Asian trading hours from the Bank of Japan, as the central bank left its monetary policy unchanged as anticipated, but downgraded inflation and growth forecast for the current fiscal year. The pair later fell on risk-aversion but bounced during the American session on the back of upbeat US data and a modest Wall Street’s comeback.

The pair found additional support in US Treasury yields, which recovered nicely on unexpected improvements in growth and employment figures. The yield on the benchmark 10-year note hit a daily high of 0.84%, ending the day just below this last.  This Friday, Japan will publish October Tokyo inflation, the preliminary estimate of September Industrial Production and the unemployment rate for the same month.

USD/JPY short-term technical outlook

The  USD/JPY pair is technically neutral, according to the 4-hour chart, as it recovered above its 20 SMA which anyway maintains its bearish slope. The larger moving averages are also heading lower above the current level, while technical indicators recovered from oversold readings, but lost momentum once they reached their midlines. The pair bottomed at 103.99 in September, while the ongoing month’s low was set at 104.02. A possible double bottom is underway, although to confirm the figure, the pair needs to break above the neckline at 106.10, quite an unlikely scenario.

Support levels: 104.30 103.95 103.50  

Resistance levels: 105.05 105.40 105.85

View Live Chart for the USD/JPY


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