USD/JPY Forecast: Correcting oversold conditions, bears still lead

Valeria Bednarik FXStreet

USD/JPY Current price: 104.71

US stimulus talks to continue this Thursday as parts move closer to a deal.
US Initial Jobless Claims foreseen at 860K for the week ended October 16.
USD/JPY corrective advance stalled well below 105.00, the risk is skewed to the downside.

The USD/JPY pair is recovering some ground after printing a fresh October low of 104.33 on Wednesday, trading in the 104.70 price zone. The dollar reached oversold conditions against multiple rivals as investors struggle to make something out of US stimulus talks. The White House and Democrats appear to be edging towards an agreement, although hard-line Republicans oppose to a large stimulus bill. Meanwhile, the election date approaches and talks have been once again extended to continue this Thursday.

The macroeconomic calendar had little to offer overnight, as Japan only published minor figures related to foreign investment. The American session will bring the US Initial Jobless Claims for the week ended October 16, foreseen at 860K from 898K. The country will also release September Existing Home Sales, seen increasing 5% when compared to August.

USD/JPY short-term technical outlook

From a technical point of view, the latest advance in USD/JPY seems corrective. The 4-hour chart shows that the pair continues developing below all of its moving averages, and with the 20 SMA still heading south below the larger ones. Technical indicators, in the meantime, have barely corrected oversold conditions, and hold well into the red, without directional strength. A critical mid-term support level is 104.00 with a steeper decline expected once below the level.

Support levels: 104.65 104.30 103.95

Resistance levels: 105.00 105.40 105.80

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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