USD/JPY: risk sentiment deteriorates, limited losses expected

Valeria Bednarik FXStreet

USD/JPY Current price: 109.93

Japanese preliminary Q1 GDP surprised to the upside.
US Fed´s Clarida and Chief Powell to offer speeches at the end of the day.

Dollar's broad strength seen late last week dominated the first trading session Monday, with the USD/JPY pair extending its advance up to 110.31. Japanese data released overnight was upbeat, as the preliminary estimate of Q1 GDP came in at 0.5%, better than the 0.0% expected, and the previous 0.4%. Annualized GDP soared to 2.1%, largely surpassing the expected -0.2%. Furthermore, Industrial Production fell in March by 0.6%, better than the 0.9% decline anticipated, while yearly basis it fell by 4.3%, slightly better than the -4.6% forecasted. Capacity Utilization, however, declined by 0.4%. Helping to keep the market's sentiment positive, PM Morrison won Australian elections, quite a surprise as polls suggested the ruling coalition would lose to Labour opposition. Market's mood turned sour in Europe, triggering a pullback from such daily high to the current 109.90 price zone.

The US macroeconomic calendar will be light this Monday, including the Chicago Fed National Activity Index for April and a couple of Fed speakers later in the day.

From a technical point of view, the pair was rejected by sellers aligned around the 61.8% retracement of the latest daily slump, now battling with the 50% retracement of the same decline. In the 4 hours chart, the 100 SMA maintains its strong bearish slope above the current level, while the 20 SMA heads higher converging with the next Fibonacci support at around 109.80. Technical indicators in the mentioned chart have eased from near overbought levels, maintaining downward slopes within positive ground, falling short of suggesting an upcoming slide. Given dollar's dominant strength and the risk-averse environment, the downside potential seems limited, with the pair instead pose to trade inside a limited intraday range.

Support levels: 109.10 108.80 108.50

Resistance levels: 109.80 110.10 110.50

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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