USD/JPY Forecast: Modest recovery on renewed dollar’s demand

USD/JPY Current Price: 108.63

• Coronavirus concerns maintain the Japanese yen strong against most major rivals.
• US data surprised to the upside, giving the greenback a temporal relief.
• USD/JPY modest bounce didn’t change the bearish stance, 107.64 still at sight.

The USD/JPY pair managed to post a modest advance this Monday but held below a critical Fibonacci resistance level at 108.65. The Japanese currency was unable to appreciate despite risk aversion took over financial markets at the beginning of the day, amid escalating concerns related to the coronavirus outbreak. Fears receded in the European session, with local shares posting modest gains, while the sentiment continued to improve in American trading hours, amid upbeat US data.

Treasury yields recovered, with the yield on the benchmark 10-year Treasury note hitting an intraday high of 1.58%, although settling barely up for the day at around 1.52%. Japanese data released at the beginning of the day failed to impress, as the Jibun Bank Manufacturing PMI for January which resulted in 48.8, worse than the 49.3 previous and expected. The country will release January Monetary Base for January during the upcoming Asian session.

USD/JPY short-term technical outlook

The USD/JPY pair is technically bearish, according to the 4-hour chart, as it met sellers around a 20 SMA, which continues heading south below the larger ones. Technical indicators in the mentioned time-frame recovered from oversold readings but pared their advances well below their midlines, now lacking directional strength. The pair would need to recover beyond 109.00 to shrug off the negative stance, while once below 108.30, the pair has room to extend its decline toward 107.64, January’s low.

Support levels: 108.30 107.95 107.60

Resistance levels: 108.65 109.00 109.40  

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