USD/JPY Forecast: Neutral in a risk-averse environment

Valeria Bednarik FXStreet

USD/JPY Current Price: 107.63

Safe-haven demand likely to maintain the pair directionless and within familiar levels.
The BOJ latest plan to support the economy added 30 trillion yen on QE.
USD/JPY neutral in the short-term, downside potential limited.

The USD/JPY pair advanced for a second consecutive week to settle at 107.60. The dismal market’s mood kept the pair directionless by the end of the week, as both currencies are usually seen as safe havens. Early Friday, Japan published its National April inflation, which came in worse than anticipated. The CPI ex-fresh food was down by 0.2% when compared to a year earlier. Also, the Bank of Japan had a monetary policy meeting, in which policymakers announced a further 30 trillion yen plan to broaden support to small and medium-sized companies, hit by the coronavirus pandemic. The announcement was largely anticipated by market players, triggering no price reaction.

Meanwhile, the poor performance of equities and easing government debt yields kept the upside limited, despite increased demand for the greenback. At the beginning of the week, Japan will release the final version of the March Leading Index, previously estimated at 83.8, and the Coincident Index for the same month, previously at 90.5.

USD/JPY short-term technical outlook

The USD/JPY pair presents a neutral-to-bullish bias in its daily chart, as its trading between directionless moving averages, the 20 SMA providing dynamic support around 107, and the 100 and 200 SMA converging in the 108.40 region. Technical indicators aim marginally higher, just above their midlines. The 4-hour chart shows that the pair is right below a directionless 20 SMA, while above the larger ones, as technical indicators hover around their midlines. Overall, the pair is neutral, and will likely extend its consolidative phase amid persistent concerns about the global economic health.

Support levels: 107.30 106.90 106.65

Resistance levels: 108.00 108.40 108.80

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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