USD/JPY Forecast: Upside limited, at risk of falling

Valeria Bednarik FXStreet

USD/JPY Current price: 108.01

The market’s mood remained depressed amid the escalation of the coronavirus pandemic.
Stocks trade in the red although off daily lows in Europe.
USD/JPY barely holding above critical support, downside potential still present.

The USD/JPY pair started the week gapping lower falling to 107.11 before closing the gap. The pair remained depressed at around 107.70, stuck around the 38.2% retracement of its latest daily advance measured between 101.17 and 111.70, now recovering from such level. Sentiment remains sour amid the coronavirus pandemic extending exponentially in the US, keeping demand for the dollar depressed. The number of worldwide cases continues on the rise, with those in the US approaching 150,000. Damage is being made to all economies, as one-third of the world is in lockdown in a desperate attempt to prevent deaths and the collapse of the health systems.

Stocks trade in the red in Europe, following the lead of their Asian counterparts, although off their daily lows. Treasury yields remain depressed and near record lows, with the yield on the benchmark 10-year note at 0.65%. Japan didn’t release macroeconomic data this Monday, while the US has scheduled February Pending Home Sales and the March Dallas Fed Manufacturing Business Index, foreseen at 6.2 from 1.2 previously.

USD/JPY short-term technical outlook

The USD/JPY pair is still at risk of falling, according to the 4-hour chart. The pair has bounced just modestly from its 100 SMA, which remains flat just below the mentioned Fibonacci retracement. The 20 SMA, on the other hand, continues heading firmly lower well above the current level, while technical indicators are barely recovering from oversold readings. The immediate support comes at 107.50, the 100 SMA, ahead of the daily low with a break below this last anticipating a steeper decline.

Support levels: 107.50 107.10 106.65

Resistance levels: 108.25 108.60 109.00

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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