USD/JPY Current price: 107.73

  • The dollar strengthens on Fed Powell’s prepared remarks.
  • Japanese data missed the market’s expectations, with the unemployment rate up to 2.9% in May.
  • USD/JPY neutral-to-bullish in the short-term needs to advance beyond 107.95.

The USD/JPY is trading near the 3-week high reached on Monday at 107.88, with the greenback generally stronger across the board. Better-than-expected US data released at the beginning of the week, coupled with encouraging comments from the US Federal Reserve’s head, Jerome Powell, back the dollar. Fed chair and Treasury Secretary Mnuchin are meant to testify before the House Financial Services Committee, but his prepared remarks have already been published.

Among other things, Powell repeated that the economic outlook remains “extraordinary uncertain,” and that the recovery will depend on how the country contains the spread of COVID-19. Rates will remain low for longer, although he added that hiring and consumer spending picked up in May, and while they are still well below pre-pandemic levels, it’s a good sign for the economy.

Japanese data released at the beginning of the day didn’t help the yen, as all figures missed the market’s expectations. The May Unemployment Rate surged to 2.9%, while Industrial Production in the same month plunged 8.4% MoM and fell 25.9% when compared to a year earlier. Housing Starts, however, were down 12.3% vs. -15.9% expected. The US session will bring the Chicago PMI for June, foreseen at 45, and the mentioned testimony from Fed’s authorities.

USD/JPY short-term technical outlook

The USD/JPY pair is trading between Fibonacci levels, holding above 107.50, the 38.2% retracement of its June slump. The risk of a downward move is limited as long as the pair remains above the level. In the short-term, and according to the 4-hour chart, the risk is skewed to the upside, although the momentum is limited. The pair is developing above all of its moving averages, with the 20 SMA crossing beyond the 100 SMA, as technical indicators consolidate well into positive levels. The next Fibonacci resistance comes at 107.95, the level to surpass to be able to gain further ground.

Support levels: 107.50 107.10 106.70

Resistance levels: 107.95 108.30 108.65

View Live Chart for the USD/JPY

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