USD/JPY Forecast: Correcting extreme overbought conditions
USD/JPY Current price: 111.70
- Japanese core National inflation resulted worse than anticipated in January.
- US preliminary estimates of Markit PMI for February to close the week.
- USD/JPY could extend its bearish correction toward the 111.00 price zone.
The Japanese currency is recovering ground, as demand for the greenback eased, while fears prevail. The extremely overbought dollar is correcting lower this Friday, but hold on to most of its weekly gains. Equities trade in the red as the coronavirus outbreak continues to take its toll on economic progress.
Japan released overnight January National CPI, which came in as expected at 0.7% YoY. The core reading, which excludes volatile prices such as fresh food and energy prices, resulted in 0.8% below the previous and the expected 0.9%. Also, the preliminary estimate for the February Jibun Bank Manufacturing PMI printed at 47.6, missing the expected bounce to 49. The December All Industry Activity Index came in flat, worse than the previous 0.9%.
Markit will publish later today the preliminary estimate of the US PMI. The Manufacturing index is seen at 51.5 vs the previous 51.9, while services output is foreseen at 53 from 54.5 previously.
USD/JPY short-term technical outlook
The USD/JPY pair has corrected extreme overbought conditions, and chances are of additional slumps ahead seem limited according to the 4-hour chart. Technical indicators remain in overbought levels, with the RSI currently losing downward momentum around 71. The 20 SMA maintains its strong bullish slope at around 111.00 and roughly 150 pips above the larger ones. The pair bottomed at 111.47, now the immediate support. Bulls will likely return on a recovery above 112.00.
Support levels: 111.50 111.10 109.80
Resistance levels: 112.00 112.40 112.70
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.
