USD/JPY defends 112.00, bleed stemmed by gains in S&P 500 futures

  • The USD/JPY has bounced off the psychological support of 112.00 in Asia, possibly due to an uptick in the S&P 500 futures. 
  • The pair found bids below the 50-day exponential moving average (EMA) for the second day. 

The USD/JPY pair defended 112.00 a few minutes before press time and is now looking to post gains, tracking the positive action in the US index futures. 

As of writing, the S&P 500 are reporting a 0.60 percent gain. The moderate rise seems to have alleviated the downside pressure around the USD/JPY, helping it recover some lost ground. After all, the relative strength index on the 4-hour chart is reporting oversold conditions in USD/JPY. 

Building a base around 50-day EMA?

The positive action in the S&P 500 futures has helped the pair fade the drop below the 50-day EMA, currently located at 112.12.

Notably, the USD/JPY bears have failed to keep losses below the 50-day EMA for the second time in the last 12 hours - the EMA was breached in the overnight trade, as the Dow Jones Industrial Average fell by 500 points, following Wednesday’s 800 point drop, but the drop to 111.83 was short-lived and the NY close was above the 50-day EMA. 

The seller’s exhaustion below the 50-day EMA indicates scope for a minor corrective rally, although gains will likely be transient if the US equities continue to slide. However, as noted by Marc to Market's Marc Chandler, the penetration of  200-moving average in the S&P 500 has been mostly brief and shallow and proven itself a good buying opportunity over the last couple of years. 

So, it seems safe to say that the odds are stacked in favor of a minor corrective rally in the USD/JPY pair. 

USD/JPY Technical Levels

FXStreet's Valeria Bednarik writes, "the 111.90 region is a strong static support, and renewed selling interest here favors an extension toward the 111.20 price zone. The bearish pressure could ease on a recovery above 112.60, quite unlikely at this point."

Resistance: 112.56 (Sept. 26 low), 112.82 (10-day EMA), 113.00 (psychological hurdle)

Support: 111.83 (previous day’s low), 111.39 (100-day EMA), 113.00 (psychological level)

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bullish Neutral Shrinking
1H Bearish Neutral High
4H Bearish Oversold High
1D Bearish Neutral Shrinking
1W Neutral Shrinking

 

 

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