USD/JPY Forecast: Dollar’s demand eases amid Fed’s QE

Valeria Bednarik FXStreet

USD/JPY Current price: 110.56

Japan’s March preliminary Jibun Bank Manufacturing PMI came in at 44.8.
Coronavirus continues to spread with more countries putting their economies on pause.
USD/JPY retains its bullish potential as market players seek for high-yielding assets.

The market is in a better mood this Tuesday, with equities up and the dollar down against most major rivals. The US Federal Reserve announcement of another round of massive QE and fresh loan facilities put a halt to panic at the beginning of the week, although Wall Street closed in the red. Asian equities, however, posted substantial gains, leading to sharp advances also in Europe. The USD/JPY pair trades lower in range in the 110.50 price zone.

The coronavirus keeps spreading worldwide and forcing economic shutdowns. Late Monday, the UK announced a three-week lockdown and closed all non-essential shops. Most Europe is now fighting to contain the spread by reducing activity to the minimum. A light of hope came for Italy, as, after the number of new cases and deaths peaked on Sunday, the country has reported fewer cases and deaths for two consecutive days.

Japan released the March preliminary Jibun Bank Manufacturing PMI, which came in at 44.8, worse than the previous 47.8 and the expected 47.6. The January Leading Economic Index was upwardly revised to 90.5, while the Coincident Index for the same month was revised to 95.2, also above the previous estimate. Markit will release the US March preliminary Manufacturing PMI, foreseen at 42.8, and the Services PMI for the same month, expected at 42.

USD/JPY short-term technical outlook

The USD/JPY pair is retaining its positive stance, despite its latest retracement, as the improved perception of risk leaves the JPY outside speculative interest’s radar. In the 4-hour chart, the pair is pressuring a bullish 20 SMA, but so far unable to break below it. The Momentum indicator has turned sharply higher within neutral levels, while the RSI hovers around 57, following price. The daily low at 110.07 is the immediate support, while the pair could recover its bullish potential once above 110.90.

Support levels: 110.05 109.65 109.20

Resistance levels: 110.90 111.30 111.65

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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