USD/JPY Forecast: Coronavirus-related lockdown pushing investors into safety

Valeria Bednarik FXStreet

USD/JPY Current price: 104.22

Fears are that European countries will need national lockdowns to curve covid contagions.
A light macroeconomic calendar exacerbates the sentiment-related trading.
USD/JPY is firmly bearish and about to pierce the 104.00 figure.

Risk aversion dominates the financial world this Wednesday, sending USD/JPY to a fresh October low of 104.15. After the WHO declare that the epicenter of the coronavirus pandemic has moved back to Europe, there are several market talks indicating national lockdowns coming to the Old Continent. France, the Netherlands and the UK are those studying the tougher measures, but restrictions may also come to Germany and other countries.

Stocks tumble in Europe, dragging US futures lower. US Treasury yields are also down, accelerating their slide and approaching their October lows. A light macroeconomic calendar in Asia, with no Japanese data, exacerbated sentiment-related trading. The US will publish minor figures, MBA Mortgage Applications for the week ended October 23, and the preliminary estimate of September Wholesales Inventories.

USD/JPY short-term technical outlook

The USD/JPY pair is trading near the mentioned low, after a modest bounce to the 104.30 was rejected by sellers. Technical readings in the 4-hour chart suggest that the pair will extend its decline, as the Momentum indicator head firmly lower within negative levels, while the RSI indicator hovers around 30, with a modest bearish slope. In the mentioned time frame, the pair is trading below bearish moving averages, with the 20 SMA around 104.65. A steeper decline could be expected on a clear break below 103.99, the September monthly low.

Support levels: 103.95 103.50 103.20

Resistance levels: 104.45 104.70 105.10

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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