USD/JPY Forecast: Under pressure on absent dollar’s demand

Valeria Bednarik FXStreet

USD/JPY Current Price: 105.71

US Treasury yields resumed their declines and trade at multi-month lows.
Political turmoil in the US related to a new aid package weighed on the dollar.
USD/JPY holding within familiar levels, bearish potential on a break below 105.55.

The USD/JPY pair has spent the day trading within Monday’s range, ending it in the red around 105.75. The pair looked at yields for direction, ignoring the positive tone of equities during US trading hours, as the dollar’s demand remained absent. Political turmoil in the US added to the greenback weakness, as lawmakers are unable to reach an agreement on the next aid package, after benefits ended last week. The yield on the benchmark 10-year Treasury note fell to its recent multi-month low of 0.51%.

At the beginning of the day, Japan published July Tokyo inflation, which came in better than expected, up by 0.6% YoY, while the core reading surged 0.4%, both better than anticipated. This Wednesday, the country will release the final July Jibun Bank Services PMI, previously estimated at 45. Later in the day, BOJ’s Governor Kuroda is due to speak about central banking in the COVID-19 era.

USD/JPY short-term technical outlook

The4-hour chart for the USD/JPY pair shows that the pair remains below a bearish 100 SMA yet above a bullish 20 SMA, this last at around 105.55. Technical indicators in the mentioned time-frame have eased from daily highs, the Momentum heading lower but above its 100 level, as the RSI stabilizes around 51. Bulls will likely remain side-lined as long as the pair holds below the 106.45 price zone, which has become a strong static resistance level.

Support levels: 105.55 105.20 104.80

Resistance levels: 106.10 106.45 106.90

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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