USD/JPY Forecast: Bullish potential limited by equities’ slump

Valeria Bednarik FXStreet

USD/JPY Current price: 105.38

BOJ reaffirmed its pledge to ease further to support the economy.
The US session will bring updates on the country’s employment situation.
USD/JPY is consolidating its weekly gains and could extend its advance beyond 106.00.

The USD/JPY pair trades near the weekly high achieved on Wednesday at 105.49, trying to find a new balance around it. The sentiment remains sour, mainly after Wall Street resumed its slump amid persistent uncertainty about an aid package and resurging coronavirus cases around the world. Asian and European indexes trade in the red, dragging US futures lower. Commodities remain under pressure, as the dollar reaches new multi-week highs against most of its major rivals, limiting chances of a bearish movement in USD/JPY.

The Bank of Japan published the Minutes of its latest meeting earlier today, and the document showed that policymakers are willing to act as needed to counter the effects of the pandemic on the economy. The focus is now on US employment data, as the country will publish Initial Jobless Claims for the week ended September 18, foreseen at 843K from 860K in the previous week. Also, US Federal Reserve Chief Powell will testify before the Senate, although no surprises are expected there.

USD/JPY short-term technical outlook

The USD/JPY pair is trading around the 61.8% retracement of its latest daily decline, holding on to a positive stance. The 4-hour chart shows that the 20 SMA has advanced further below the current level, now converging with the 38.2% retracement of the same decline. Technical indicators, in the meantime, remain well into positive levels with modest upward slopes. The risk is skewed to the upside, although with falling equities, advances could be limited. Anyway, and as long as it stays above 104.85, the pair has room to advance towards the 106.25 area.

Support levels: 104.85 104.50 104.00

Resistance levels: 105.50 105.90 106.25

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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