USD/JPY Forecast: Under pressure, but above critical Fibonacci support

USD/JPY Current price: 103.52

• The Bank left its monetary policy unchanged as wide52ly anticipated.
• Manufacturing activity in Japan is expected to have bounced modestly in January.
• USD/JPY could accelerate its slump on a break below 103.25, a Fibonacci support level.

The USD/JPY pair fell to 103.32, bouncing during US trading hours to settle in the 103.50 price zone. The pair traded alongside US Treasury yields, which eased in pre-opening trading but recovered during US trading hours. Nevertheless, the yield on the benchmark 10-year Treasury note settled at 1.10%, pretty much unchanged from its weekly opening level.

The Bank of Japan had a monetary policy. As widely expected, policymakers maintained the current policy unchanged. However, they downwardly reviewed this fiscal year’s growth to -5.6% from -5.5%. Governor Haruhiko Kuroda later said that it was too early to consider an exit from the ongoing “powerful” monetary stimulus. The country also published the December Merchandise Trade Balance, which posted a surplus of ¥751 billion, below expected but more than doubling the previous monthly reading. This Friday, Japan will publish December National inflation, and the January preliminary Jibun Bank Manufacturing PMI, foresee at 50.5 from 50 previously.

USD/JPY short-term technical outlook

The USD/JPY pair retains its bearish stance in the near-term, despite bouncing from daily lows. The 4-hour chart shows that the pair remains below all of its moving averages, which anyway remain directionless and confined to a tight range. Technical indicators stand within negative levels, off their daily lows but without directional strength. A steeper decline could be expected on a break below 103.25, the 61.8% retracement of the January’s rally.

Support levels: 103.25 102.90 102.55

Resistance levels: 104.05 104.40 104.80

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