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)
 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD chops around amid end-of-month flows, ahead of Trump

EUR/USD is battling 1.11, close to the two-month highs amid choppy trading. Hopes for a fiscal boost in Europe and mixed satisfactory data have supported the currency pair. , Sino-American tensions are rising and investors await President Trump's China announcement.

EUR/USD News

GBP/USD advances amid US dollar weakness, shrugging off concerns

GBP/USD is trading above 1.23, edging higher amid US dollar weakness and Britain's gradual reopening. Intensifying Sino-American tensions and the Brexit impasse are ignored. 

GBP/USD News

Cryptocurrencies: $348M in matured derivatives boost the market

Futures and options contracts' expiration brings a wave of volatility to the crypto market. Ethereum takes advantage and attacks resistances in the market dominance chart, Bitcoin goes back. Ripple disappoints despite regaining the third place in market capitalization.

Read more

Canada's economy falls by 8.2% annualized in Q1, better than expected, USD/CAD shakes

The Canadian economy squeezed by an annualized rate of 8.2% in the first quarter of 2020, better than -10% expected. Quarterly, Gross Domestic Product (GDP) squeezed by 2.1%. Most of the downfall occurred in March, with a drop of 7.2%, better than 8.5% projected. 

Read more

WTI drops 4% and eyes $32 mark amid risk-off, weakening demand

The selling pressure around WTI (July futures on Nymex) accelerates following the break below the 33 level, as bears now target the 32 support zone heading into the key US macro data and US President Donald Trump’s response to the Hong Kong issue.

Oil News

Forex Majors

Cryptocurrencies

Signatures