USD/JPY Forecast: Lower lows still likely

Valeria Bednarik FXStreet

USD/JPY Current price: 110.40

Coronavirus spreading in Europe keeps investors on their toes.
Wall Street set to extend its slump, despite two days of substantial losses.
USD/JPY bearish as long as below 110.65, a Fibonacci resistance level.

The USD/JPY pair is trading positively this Wednesday, not far from a daily peak of 110.57. It bottomed at 109.88 late Tuesday, as Wall Street plummeted for a second consecutive day while government bond yields sunk, amid the coronavirus outbreak spreading in Europe. Despite the US government has repeatedly stated that the outbreak is under control in the country, fears of recession and a global economic slowdown, hit high-yielding assets in benefit of those considered safe-haven.

Equities remain under pressure, but yields bounced modestly, helping USD/JPY to recover some ground. Japan didn’t release relevant macroeconomic data this Wednesday, while the US will also have a light calendar, as it will only unveil January New Home Sales, seen up 3.5% MoM.

USD/JPY short-term technical outlook

The USD/JPY pair is trading around 110.40, consolidating losses below a critical Fibonacci level, the 61.8% retracement of its latest bullish run at 110.65. The upside seems well-limited, as the 20 SMA has extended its slump above the current level, converging with the 50% retracement of the same advance. Technical indicators have recovered from oversold levels but hold near their lows. The 100 SMA provides short-term support around 110.20. Chances of lower lows will increase on a break below this last.

Support levels: 110.20 109.80 109.45

Resistance levels: 110.65 111.00 111.40

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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