USD/JPY Forecast: Scope to break above 110.00
USD/JPY Current Price: 109.59
- Japan to release the preliminary estimate of May Machinery Tool Orders, previously at -48.3%.
- Upbeat US employment data reinforced hopes for a sooner-than-expected economic recovery.
- USD/JPY underpinned by equities and yields could extend its advance beyond 110.00.
The USD/JPY pair traded as high as 109.84 last Friday, as an optimistic market mood coupled with better-than-expected US data. Following several weeks of frozen economic activity amid the ongoing pandemic, Europe and the US are lifting restrictions and gearing back up, with no signs of the so-feared second wave of contagions. Additionally, the US reported it gained 2.5 million jobs in May against expectations of an 8 million drop in jobs. The pair found support in rallying stocks and higher US Treasury yields, which anyway retreated from highs ahead of the close. Nevertheless, the yield on the benchmark 10-year Treasury note settled at 0.89%.
Japanese data released by the end of the week was mixed, as Overall Household Spending declined by 11.1% YoY in April, better than anticipated. However, the preliminary estimate of the April Leading Economic Index plunged to 76.2 from 85.1, also missing the market’s expectations. The country will release this Monday, May Money Supply and the preliminary estimate of Machine Tool Orders for the same month, previously at -48.3%.
USD/JPY short-term technical outlook
The USD/JPY pair is bullish according to the daily chart, as it has rallied beyond all of its moving averages, although the 100 and 200 DMA converge directionless at around 108.40, suggesting that a steady rally in the longer term should not be taken for granted. Technical Indicators, in the meantime, head slowly but steadily higher, the RSI in overbought levels. In the shorter-term, and according to the 4-hour chart, the risk remains skewed to the upside, as the pair remains well above their midlines, while technical indicators barely eased from overbought levels, falling short from suggesting an upcoming slide.
Support levels: 109.40 109.05 108.60
Resistance levels: 109.85 110.10 110.45
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.
