USD/JPY Forecast: Something has to give

Valeria Bednarik FXStreet

USD/JPY Current price: 106.89

Japanese data beat expectations but fall short of showing signs of improvement.
Coronavirus crisis continues to dominate the financial world, equities leading the way.
USD/JPY neutral-to-bullish in the short-term, critical resistance at 108.00.

The FX board is showing some stability this Tuesday, although investors remain on their toes amid the coronavirus crisis. Wall Street had another Black Monday, with the three major indexes shedding roughly 12% each, and government yields plummeting, despite aggressive measures taken by several central banks. The Bank of Japan is no exception, and purchased this Tuesday a record high of 120.4 billion yen of Japanese ETFs, after announcing at the beginning of the week, it would increase purchases up to 12 trillion yen per year.

Asian equities, however, advanced leading to some gains in US futures and a modest bounce in Treasury yields. The USD/JPY pair followed and advanced to 107.18. Things are not that good in Europe, with major indexes in the red, and Wall Street trimming pre-opening gains.

Japanese data beat expectations but remained far from impressive. Industrial Production in January rose 1.0% MoM, while it declined by 2.3% when compared to a year earlier. Capacity Utilization in the same month increased by 1.1%.

The American session will bring US Retail Sales, seen up in February 0.2%, while the Retail Sales Control Group is expected at 0.4% from 0.0% previously. The country will also release February Industrial Production and Capacity Utilization.

USD/JPY short-term technical outlook

The USD/JPY pair has retreated from the mentioned high, now hovering around the 50% retracement of its latest daily slump. The 4-hour chart shows that the pair continues to develop below a bearish 100 SMA and above a bullish 20 SMA, with the distance between both shrinking. One will have to give. Technical indicators hold within positive levels but lack directional strength. So far this week, the downside is being protected by buyers aligned around 105.35, the 38.2% retracement of the mentioned slump, while a critical resistance comes at 108.00, the 61.8% retracement.

Support levels: 106.50 106.10 105.70

Resistance levels: 107.10 107.60 108.00

View Live Chart for the USD/JPY

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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