USD/JPY Forecast: Pressured by political jitters in the US

Valeria Bednarik FXStreet

USD/JPY Current price: 104.77

Progress that’s no-progress around a US stimulus package hurt the greenback.
Japanese data indicated moderated economic improvement in the last couple of months.
USD/JPY at risk of falling further once below the 104.30 support level.

The USD/JPY pair broke lower last week, ending it around 104.70, near a 4-week low of 104.33. The American currency fell, amid mounting tensions ahead of elections and despite “progress” in a US stimulus aid package. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi had been engaged in daily talks ever since the week started, reporting advances but warning that chances of a bill being approved before the presidential election are quite slim. Economic growth, in the meantime, is being put at doubt amid new coronavirus outbreaks worldwide. Concerns overshadowed higher government bond yields, usually a bullish factor for USD/JPY.

Japanese data published on Friday was generally encouraging, as the National CPI ex-Fresh Food declined by 0.3% YoY, better than the expected -0.4%. Also, the preliminary estimate of the Jibun Bank Manufacturing PMI for October came in at 48, improving from 47.7. The country will publish the August Leading Economic Index this Monday, and the Coincident Index for the same month.

USD/JPY short-term technical outlook

The USD/JPY is technically bearish according to the daily chart, as the pair has fallen below all of its moving averages, spending the last couple of days consolidating losses. Technical indicators in the mentioned time frame have turned south within negative levels, although their bearish strength is limited. The 4-hour chart shows that a bearish 20 SMA rejected an intraday advance, while the Momentum heads higher in neutral readings. The RSI, however, consolidates near oversold levels, skewing the risk to the downside.

Support levels: 104.30 103.95 103.50

Resistance levels: 105.00 105.40 105.80

View Live Chart for the USD/JPY

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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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