USD/JPY Forecast: Dollar firmer, but bullish potential scarce

Valeria Bednarik FXStreet

USD/JPY Current price: 105.45

The market sentiment is sour, leading to renewed dollar’s demand.
Japan’s Money Supply surged 9% in September, above the market’s expectations.
USD/JPY is trading at the lower end of its latest range around 105.40.

The dollar is firmer this Tuesday, as risk-aversion is back in fashion. To the well-known issues regarding a US stimulus package, and the pandemic spreading and delaying the economic recovery, this Tuesday Johnson & Johnson paused the trial of its coronavirus vaccine amid an unexpected illness in one participant. Also, China has reportedly banned imports of Australian coal, leaving some Australian vessels stuck at Chinese ports. The USD/JPY pair is up from a daily low of 105.23, although with the bullish potential limited amid yen’s safe-haven condition.

Japan published overnight September Money Supply, which increased 9%, while China published its Trade Balance for the same month. In dollar terms, it posted a surplus of $37B, below expected amid a sharp rise in imports, which surged 11.6%, the strongest growth since December 2019. The US session will bring the country’s final reading of September inflation, foreseen at 1.4%YoY.

USD/JPY short-term technical outlook

The USD/JPY pair has a limited bullish potential, according to the 4-hour chart, as it’s unable to overcome its 100 SMA, while below the 20 and 200 SMAs. Technical indicators in the mentioned time-frame have recovered from oversold readings, but remain within negative levels with uneven strength. A steeper advance is out of the picture for now, with the next relevant resistance at 105.80, a probable top for today should the greenback continues to advance.

Support levels: 105.00 104.65 104.20

Resistance levels: 105.80 106.25 106.60

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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