USD/JPY Forecast: Waiting for a catalyst

Valeria Bednarik FXStreet

USD/JPY Current Price: 107.03

Japan’s economy expected to have contracted by 1.2% in the three months to March.
Wall Street gained ground on Friday but closed the week in the red.
USD/JPY technically neutral, bearish case to increase below 106.65.

The USD/JPY pair eased within range on Friday, anyway holding on to weekly gains. The pair heads into the weekly opening just above the 107.00 level, weighed by dismal US data, although with the slump limited by firmer equities. US indexes settled near their daily highs but closed the week in the red, undermined by comments from the Federal Reserve’s head, Jerome Powell, dismissing chances of going into negative rates.

By the end of the week, Japan published the April Producer Price Index, which was down in the month by 1.5%. The annual reading came in at -2.3%, worse than anticipated. The country will start the week publishing the preliminary estimate of Q1 Gross Domestic Product, with the economy expected to have shrunk by 1.2% in the three months to March.

USD/JPY short-term technical outlook

The daily chart for the USD/JPY pair shows that it’s trading around a flat 20 DMA but well below the larger ones. Technical indicators, in the meantime, head nowhere just below their midlines. The pair is neutral-to-bearish and would need to recover above 107.70 to have a chance of recovering ground. In the shorter-term, and according to the 4-hour chart, the pair is unable to provide directional clues, trading between mild-bearish moving averages, as technical indicators turn lower just above their midlines. The main support is 106.65, the 61.8% retracement of its latest daily advance.

Support levels: 106.90 106.65 106.30

Resistance levels: 107.30 107.70 108.00

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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