USD/JPY Forecast: Mood improves, but bulls will have to wait

Valeria Bednarik FXStreet

USD/JPY Current price: 107.05

The coronavirus continues to spread, but governments refuse to close economies.
Global equities trade in the green amid hopes for a COVID-19 vaccine.
USD/JPY is in recovery mode, but the bullish potential remains limited.

Investors kick-started the week with a positive mood, which helps USD/JPY recover above the 107.00 level. The number of coronavirus contagions remains on the rise not only in the US, but two factors offset fears. The first is hopes about possible treatment, as reported by Gilead by the end of the previous week, as its remdesivir drastically reduces the death rate. The other is that governments are refusing to return to lockdown and working on keeping the economies up.

In the case of Japan, the country has been reporting an average of 200 new cases per day, although the economy minister, Yasutoshi Nishimura, said that there’s no need to declare the state of emergency again in Tokyo. In the US, just the Florida state reported roughly 15,300 new cases on Sunday and a country total of over 58,300. However, authorities have no intention to shut down the economy again.

Equities are up, in line with the ongoing sentiment. As long as they remain on the bullish side, the pair will likely continue to advance. In the data front, Japan published the May Tertiary Industry Index, which resulted in -2.1%, improving from -6% in April. The US won’t release relevant data this Monday.

USD/JPY short-term technical outlook

The USD/JPY pair is trading around 107.05, with a limited bullish potential given the absence of dollar’s demand. The 4-hour chart shows that sellers are rejecting advances around a bearish 20 SMA, which heads lower below the larger ones. Technical indicators, in the meantime, lack directional strength, standing just below their midlines. The pair could have better chances of recovering once above 107.20, the immediate resistance.

Support levels: 106.95 106.60 106.25

Resistance levels: 107.20 107.50 107.95

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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