USD/JPY Forecast: The return of the dollar’s sell-off

Valeria Bednarik FXStreet

USD/JPY Current price: 105.76

Japan July’s Jibun Bank Services PMI came in at 45.4 from 45 in June.
US ADP survey and ISM Non-Manufacturing PMI coming up next.
USD/JPY is bouncing from fresh weekly lows, risk skewed to the downside.

Whether last week’s reasons remain valid or not, it’s little relevant, as speculative interest continues to dump the dollar. A dovish Fed, a terrible GDP, tensions with China, and no progress in Congress on a new coronavirus aid-package, not to mention the pandemic, all have combined to keep the top currency in sell-off mode. The USD/JPY pair trades near a fresh weekly low of 105.50, while other major currencies are flirting with fresh multi-month highs against the American currency. Limiting the slump, equities and yields are ticking higher.

In the data front, Japan published the July Jibun Bank Services PMI, which came in at 45.4, from 45 in the previous month. The upcoming US session will bring the ADP survey on private employment creation for July, foreseen at 1.5M from 2.36M in the previous month. Markit will publish the final version of the Services PMI for the same month, while the country will unveil the official ISM Non-Manufacturing PMI, expected at 55 from 57.1 in the previous month.

USD/JPY short-term technical outlook

The Japanese currency lags when compared to other assets, but its bearish potential is clear. From a technical point of view, the 4-hour chart for USD/JPY offers a neutral-to-bearish stance, as the pair is trading below all of its moving averages, with the price how struggling to recover above a bullish 20 SMA. Technical indicators are trying to recover some ground, but lack enough strength, holding just below their midlines.

Support levels: 105.50 105.15 104.70

Resistance levels: 106.00 106.45 106.80

View Live Chart for the USD/JPY

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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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