USD/JPY Forecast: Fear helped the yen

Valeria Bednarik FXStreet

USD/JPY Current Price: 107.99

The number of coronavirus cases in the US largely overtook those on China.
Wall Street plummeted, US Treasury yields followed through.
USD/JPY pair at risk of extending its decline toward 105.30.

The USD/JPY pair extended its decline on Friday to close the week in the red just below the 108.00 level. The market’s sentiment took a turn to the worse on Friday, after the number of coronavirus cases in the US largely overtook those on China. The dollar fell alongside Wall Street, both adding to the bearish case of the pair. US Treasury yields, in the meantime, edged sharply lower, with the yield on the benchmark 10-year Treasury note settling at 0.67%.

At the end of the week, Japan published Tokyo March inflation, which resulted slightly below expected, at 0.4% YoY, although the core reading, excluding fresh food and energy prices, remained stable at 0.7% YoY. The country’s macroeconomic calendar will remain empty this Monday.

USD/JPY short-term technical outlook

The USD/JPY pair has corrected lower, meeting support around the 38.2% retracement of its latest daily advance at 107.65. In the daily chart, a flat 20 DMA converges with the mentioned Fibonacci level, while the pair is now below the 100 and 200 SMA, both lacking directional strength. Technical indicators in the mentioned time-frame have lost their bullish strength, the Momentum holding within positive levels, and the RSI already at 47. Shorter-term, and according to the 4-hour chart, the risk is skewed to the downside, as the pair is now far below a bearish 20 SMA, while barely holding above a flat 100 SMA, and as technical indicators hold near oversold readings with no signs of bearish exhaustion.

Support levels: 107.65 107.30 106.90

Resistance levels: 108.25 108.70 109.10

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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