USD/JPY Forecast: Bulls hold the grip

Valeria Bednarik FXStreet

USD/JPY Current price: 106.86

The US Treasury yields momentum continues to underpin USD/JPY.
Japan’s July Money Supply M2+CD increased to 7.9% YoY from 7.2% in the previous month.
USD/JPY is bullish in the short-term and with room to break above 107.00.

The USD/JPY pair extended its advance overnight, slowly but steadily approaching the 107.00 level. The dollar, however, is weaker against most major rivals, only firmer against the Japanese yen. The bullish breakout witnessed Tuesday, and the persistent momentum in US Treasury yields underpin USD/JPY. Optimism prevails, despite US congress members are still unable to reach an agreement on a new coronavirus aid package. US President Trump’s executive orders announced during the weekend overshadow the stalemate among lawmakers.

Equities advanced in Asia, although European ones are trading with a mixed tone, although Wall Street aims higher ahead of the opening. Treasury yields, in the meantime, are standing at one-month highs. In regards to macroeconomic data, Japan published the July Money Supply M2+CD, which increased to 7.9% YoY from 7.2% in the previous month. The US will release later today July CPI data.

USD/JPY short-term technical outlook

The USD/JPY pair is trading near its daily high in the 106.90 price zone, bullish in the short-term. The 4-hour chart shows that it finally surpassed its 200 SMA, while the 20 SMA accelerated its advance above the 100 SMA, both below the larger one. Technical indicators, in the meantime, have reached overbought territory, partially losing their bullish strength but holding on to daily highs. The pair has now room to test the 107.00 area, with a break above it anticipating another leg north.

Support levels: 106.60 106.25 105.70

Resistance levels: 107.00 107.45 107.80

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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