USD/JPY Forecast: Critical support at 106.65

Valeria Bednarik FXStreet

USD/JPY Current Price: 107.00

Powell saved the day, helping the pair to bounce from near a Fibonacci support level.
US Treasury yields remain under pressure, Wall Street collapsed.
USD/JPY retains its bearish stance in the short-term, could near 106.00.

The Japanese yen strengthened against its American rival for most of this Wednesday, with USD/JPY bottoming at 106.73. The pair recovered with Fed’s Powell comments, although the advance was moderated by plummeting equities, which prevented the pair from recovering sharply, now struggling to recover beyond the 107.00 level. The fact that Chief Powell mentioned significant downside risks to the economy related to the current pandemic-related crisis weighed on US Treasury yields, which closed the day with losses.

At the beginning of the day, Japan published its March Trade Balance, which posted a surplus of ¥103.1B much worse than anticipated, although the Eco Watchers Survey showed that the outlook improved to 16.6, while the assessment of the current situation rose to 7.9, both beating expectations. Early Thursday, the country will release the April Producer Price Index, seen down by 0.9% MoM and by 1.6% YoY.

USD/JPY short-term technical outlook

The USD/JPY pair is trading below the 38.2% retracement of its latest daily advance at 107.08, after nearing the 61.8% retracement of the same decline at 106.65. Technical readings in the 4-hour chart favour a downside extension for the upcoming hours, as the pair is now developing below its moving averages, the Momentum heading lower and the RSI stable around 48. Below the mentioned Fibonacci support the pair will likely accelerate its decline towards the 106.00 figure.

Support levels: 106.90 106.65 106.30

Resistance levels: 107.70 108.00 108.40

View Live Chart for the USD/JPY

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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