USD/JPY jumped to 111.80 in the last 24 hours, as expected, however, the bullish move does not look convincing with multiple 8-hour
candles signaling indecision in the market place. As a result, the 200-day moving average (MA) support of 111.33 could come into play ahead of the weekend. 

The anti-risk JPY was offered on Thursday and in the Asian session today on reports stating that the Japanese government may downgrade its economic assessment, citing growing risks from the external sector. After all, China - one of the biggest market for Japanese exports -has slowed down considerably in the last few months, courtesy of the trade war with the US. Further, the world's second-largest economy could see a deeper slowdown in the near future, according to forward-looking indicators

So, the downward revision of the economic assessment would hardly be surprising. Also, the Bank of Japan's response to pronounced
slowdown if any is unlikely to be big bang stimulus. The central bank seems to have run out of ammo, having run an unprecedented stimulus program for six years and at the most can expand the 10-year yield's target range to stimulate the economy, if needed. 

Hence, the gains seen in the USD/JPY pair in the last 24 hours could be erased, unless risk assets (equities) post stellar gains. In that case, the pair may challenge and possibly break above 112.00. 

8-hour chart

The above chart shows an indecisive breakout. 

The pair found acceptance above the falling trendline yesterday. So far, however, the follow-through has been anything but bullish, as
indicated by the back-to-back doji candles, which are widely considered a sign of indecision in the market place. 

That coupled with the bearish divergence of the relative strength index (RSI) on the hourly chart indicates scope for a pullback to key
support levels at 111.49 (200-hour MA) and possibly to 111.33 (200-day MA). A deeper drop could be seen, especially if the US
10-year treasury yield drops below the weekly low of 2.59 percent. 

The bullish case would again strengthen if the spot finds acceptance above 111.90. 

Support

111.49 (200-hour MA)

111.33 (200-day MA)

111.00 (psychological support)

Resistance

111.90 (overnight high)

112.14 (recent high)

112.30 (Nov. 30 low)
 

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