USD/JPY Forecast: Critical support at 111.25

Valeria Bednarik FXStreet

USD/JPY Current Price: 111.53

Japan’s data reinforces the belief the economy is heading into a technical recession.
High-yielding assets under pressure amid coronavirus possible effects on economic growth.
USD/JPY at risk of extending its decline in the short-term, bearish below 111.25.

The USD/JPY pair has retreated in the last trading day of the week to finish it at around 111.50, still the highest weekly close since April 2019. The slump had to do with easing dollar’s demand amid profit-taking ahead of the weekend and fueled by dismal US data. Supporting the picture, global indexes closed in the red, while government debt yields collapsed. The US 30-year Treasury note fell to 1.89% a record low, as possible coronavirus effects on economic growth maintained the mood depressed.

Japanese data released on Friday failed to impress, as January National CP came in as expected at 0.7% YoY, although 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 was unchanged, worse than the previous 0.9%. The figures reinforced the belief that the Japanese economy is heading into a technical recession. The country celebrates a holiday this Monday, and there won’t be macroeconomic publications.

USD/JPY short-term technical outlook

The USD/JPY pair has corrected extreme overbought conditions in the daily chart, although it retains its bullish stance. Technical indicators eased but remain far above their midlines while moving averages head higher far below the current level. The 4-hour chart shows that the decline will face significant support at 111.30, where the pair has the 38.2% retracement of its latest bullish run and a bullish 20 SMA. Technical indicators head sharply lower, still above their midlines, anyway suggesting at least a test of the mentioned support level.

Support levels: 111.25 110.90 110.50

Resistance levels: 112.00 112.40 112.70

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.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.