USD/JPY Forecast: Lethargic near weekly highs

Valeria Bednarik FXStreet

USD/JPY Current price: 105.57

A moderated optimism persists ahead of critical US data.
Japan’s Tankan Large Manufacturing Index resulted at -27 in Q3.
USD/JPY neutral-to-bullish in the short-term and needs to break above 105.80.

The USD/JPY is trading within familiar levels in the 105.50/60 price zone, amid mixed clues. Wall Street closed with gains, despite US Treasury Secretary Mnuchin said that Congress was not able to clinch a deal, which pushed equities away from daily highs. The moderated optimism that prevailed through the Asian session suffered a set back after London’s opening, as the EU is set to start legal actions against the UK for breaching the Withdrawal Agreement. European indexes trade mixed, not far from their opening levels.

On a positive note, US Treasury yields remain near weekly highs after encouraging US data released on Wednesday. Higher yields usually lead to gains in USD/JPY. Demand for the greenback, in the meantime, remain scarce.

Japanese data released overnight showed that the economy is not yet out of the woods. The Tankan Large Manufacturing Index resulted at -27 in Q3, better than the previous -34 but missing the expected -23. The September Jibun Bank Manufacturing PMI printed at 47.7 from 47.3 in August. Later today, the US will publish Initial Jobless Claims for the week ended September 25, and the official ISM Manufacturing PMI, foreseen in September at 56.3.

USD/JPY short-term technical outlook

The USD/JPY pair has continued to find buyers around the 61.8% retracement of its latest daily decline at 105.40, the immediate support level. The 4-hour chart shows that the pair remains stuck between moving averages, while technical indicators stand above their midlines, but without directional strength. The pair would need to clearly break above the 105.80 resistance to have chances of retesting the 106.26 level, September 11 daily high.

Support levels: 105.40 105.00 104.60

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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