USD/JPY Forecast: Japan to return to business with risk turned on

USD/JPY Current Price: 108.65

• US President Trump said phase one of the trade deal with China to be signed on January 15.
• Wall Street closed Tuesday with modest gains and near all-time highs.
• USD/JPY recovery just modestly from December low at 108.39, bearish below it.

The USD/JPY pair recovered from a daily low of 108.46 on Tuesday, although the following recovery fell short of trimming daily losses, as selling interest remains strong ahead of the 108.90 resistance. The pair fell on the back of persistent dollar’s weakness, despite optimistic headlines that should have played against the safe-haven yen. During US trading hours, the US President, Donald Trump, announced through Twitter that phase one would be signed in Washington on January 15, while he will later head to Beijing to initiate the next round of negotiations. Wall Street managed to post some modest gains in the last trading day of the year.

Japanese markets have been closed on holidays, with activity resuming this Thursday. There’s no data scheduled for release in the country, although the pair could experience some strong volatility at the opening, with movements exacerbated by thin market conditions.

USD/JPY short-term technical outlook

The USD/JPY pair has neared its December low at 108.39, and overall bearish, as it remains below the 108.90 level, a line in the sand for those trying to push the pair further lower. The 4-hour chart shows that the pair is currently below all of its moving averages,  with the 20 SMA heading firmly lower below the 100 SMA, both well above the current level. Technical indicators in the mentioned chart are bouncing modestly within extreme oversold levels, far from indicating an interim bottom.

 Support levels: 108.40 108.10 107.70

Resistance levels 108.90 109.30 109.70

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