USD/JPY Forecast: Safe havens strengthening amid a dismal mood
USD/JPY Current price: 106.84
- Japan’s April Machine Tool Orders collapsed to -48.3%, March reading revised to -40.7%.
- Equities and government bond yields fall after Fed’s Powell comments.
- USD/JPY at risk of extending its decline, critical support at 106.65.
The USD/JPY pair is trading at the lower end of its weekly range sub-107.00. as the market’s mood remains downbeat. Comments from US Federal Reserve Chief, Jerome Powell, were behind such mood, as he warned about the high risks posed to the economy from the ongoing crisis. Nevertheless, he also said that the central bank is not thinking about turning rates negatives, which boosted the greenback against most major rivals.
Stock indexes are in the red across Asia and Europe, while government bond yields, particularly US ones, continue to slide. Fears about a second wave of coronavirus contagion add to the dismal sentiment. Meanwhile, PM Abe has announced it plans to lift the state of emergency in 39 prefectures, as soon as next week, but will remain in 8 prefectures, including Tokyo.
In the data front, Japan published the preliminary estimate of April Machine Tool Orders, which collapsed to -48.3%. March figure was revised to -40.7%, slightly better than the previous estimate of -40.8%. The US will release today Initial Jobless Claims for the week ended May 8, foreseen at 2.5 million, an improvement from what the country reported in the previous weeks, although still a concerning figure.
USD/JPY short-term technical outlook
From a technical point of view, the USD/JPY pair is trading around the 50% retracement of its latest daily advance, measured between 106.14 and 107.76. The 4-hour chart shows that the pair has spent most of the day below all of its moving averages, while technical indicators remain within negative levels, lacking directional strength. Overall, the risk remains skewed to the downside, with a break below 106.65, the 61.8% retracement of the mentioned advance, opening doors for a steeper decline.
Support levels: 106.65 106.30 106.00
Resistance levels: 109.90 107.30 107.70
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.
