USD/JPY Forecast: Dismal mood likely to favor the yen

Valeria Bednarik FXStreet

USD/JPY Current price: 104.84

Wall Street collapsed, and Treasury yields fell amid no progress in stimulus talks, coronavirus.
The Japanese Leading Economic Index resulted at 88.4 in August, below expected.
USD/JPY holds on to modest intraday gains, bullish potential limited.

The USD/JPY pair surged to 105.05 during US trading hours, as the greenback partially benefited from risk-aversion. However, the pair retreated from the level as Wall Street collapsed, with the three major indexes losing over 2.5% each. US Treasury yields also fell, with the dismal mood backed by the record surge in coronavirus cases in Europe and the US and the lack of progress in US stimulus talks.

Japan published at the beginning of the day, the September Corporate Service Price Index, which improved from 1.1% to 1.3% YoY. The August Leading Economic Index came in at 88.4, missing expectations of 88.8 The Coincident Index for the same month printed at 79.2, also below the market’s forecast. The country’s macroeconomic calendar will remain empty this Tuesday.

USD/JPY short-term technical outlook

The USD/JPY pair retains modest intraday gains, trading in the 104.80 price zone. The 4-hour chart shows that the pair has managed to hold above its 20 SMA, which have lost its bearish slope. In the mentioned time-frame, the pair remains below converging 100 and 200 SMAs. Technical indicators, in the meantime, have turned flat around their midlines. The decline may resume on a break below 104.70, the immediate support, while bulls can have better chances if the manages to advance beyond 105.40.

Support levels: 104.70 104.30 103.95

Resistance levels: 105.05 105.40 105.80

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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