USD/JPY Forecast: Lifeless amid prevalent caution

USD/JPY Current price: 105.40

• Japanese data resulted worse than anticipated, with Industrial Production barely up in August.
• The US session will bring several Fed’s speakers, including vice-chair Clarida.
• USD/JPY at risk of losing the 105.00 level and accelerating its slump.

The USD/JPY pair trades around its daily opening in the 105.40 price zone, on pause amid a cautious mood. The greenback trades mixed across the FX board, as equities struggle to retain modest intraday gains. Providing support to the market’s sentiment,  recent headlines indicate that UK PM Boris Johnson willingness to extend trade negotiations with the EU beyond October 15. US Treasury yields, in the meantime, remain depressed near weekly lows, although the yield on the benchmark 10-year note holds above the 0.70% threshold.

Japanese data published at the beginning of the day was disappointing, as Industrial Production rose 1% MoM in August, below the 1.7% expected. Yearly basis, Industrial Production fell 13.8%. Capacity Utilization in the same period, rose 2.9% missing the expected 3.6%. The US macroeconomic calendar includes today the September PPI, foreseen at 0.2% YoY, and several Fed’s speakers, including Vice-chair Clarida.

USD/JPY short-term technical outlook

The USD/JPY pair has a limited bullish potential, according to the 4-hour chart, as it continues to trade below all of its moving averages. Furthermore, the 20 SMA maintains its bearish strength and is about to cross below the 100 SMA. Technical indicators have recovered unevenly from near oversold readings, and while they still head higher, they remain below their midlines. The pair needs to break above the 105.80 resistance to gather bullish momentum, something quite unlikely at this point. Bears have better chances, although they need a break below 105.00 to confirm a new leg south.

Support levels:  105.00 104.65 104.20

Resistance levels: 105.80 106.25 106.60

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