USD/JPY Forecast: Needs a quick break above 50-DMA, else risk sharp losses

Omkar Godbole FXStreet Contributor

USD/JPY rose to a high of 114.96 on Wednesday before deflating to 114.11 by the day end closing. The American dollar was offered across the board in the North American session after the Atlanta Fed revised the first quarter GDP lower to 2.2% from the Feb. 9 projection of 2.7%. The sharp downward revision of the GDP coupled with Yellen’s disappointing remarks on the economy strengthened the offered tone around the USD.

Upbeat US data fail to lift the US dollar

The consumer-price index rose to a larger-than-forecast 0.6% after a 0.3% gain in December, Labor Department figures showed Wednesday. That was the biggest rise since Feb 2013. Core CPI rose to a seasonally adjusted 0.3%, from 0.2% in the preceding month.

Meanwhile, retail sales increased 0.4% last month, buoyed by purchases of electronics and appliances. The core retail sales number, which excludes automobiles, gasoline, building materials and food services, retail sales increased 0.4%.

Despite the upbeat data, the US 10-year yield struggled to extend gains above 2.5%. The yield was last seen trading around 2.485%.

Technicals - hovers near critical trend line support

4-hour chart

The rejection at the 50-DMA on Wednesday, followed by a drop to 114.00 levels despite upbeat US data suggests the pair could breach the rising trend line support seen on the above chart around 113.90. The RSI has already breached the rising trend line.
A breach of 113.90 could yield a sell-off in 113.25 - 113.08 (50-MA on 4-hour).
On the higher side only a daily close above 115.00 (50-DMA) would signal continuation of the rally from the recent low of 111.61.

AUD/USD Forecast: And the rally continues…

Daily chart

Wednesday’s close above 0.77 handle marks the continuation of the rally from the Dec 23 low of 0.7160.
The daily RSI is yet to hit the overbought territory, thus indicating room for a test of resistance at 0.7778 (Nov 8 high).
On the downside, only a daily close below 10-DMA would signal the rally has ended.
The sharp drop in the Aussie full time employment in January could ensure the resistance at 0.7778 holds today.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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