USD/JPY stays in range above 112 as Wall Street rebounds

  • US Dollar Index clings to recovery gains, looks to close the week above 95.
  • Consumer Confidence in the U.S. weakens slightly. 
  • Wall Street gains traction on Friday.

The bearish pressure surrounding the USD/JPY pair seems to have faded a little on Friday. Although the pair failed to break above 112.50 earlier today, it remains above the 112 handle. As of writing, the pair was virtually unchanged on the day at 112.15.

Today's data from the United States showed that the import prices rose 0.5% and 3.5% in September on a monthly and yearly basis, respectively. Meanwhile, October's first reading of the University of Michigan's Consumer Confidence Index eased to 99 from 100.1 in September. Commenting on the sentiment survey, "Consumer sentiment slipped in early October, although it remained at quite favorable levels and just above the average reading during 2018 (98.5)," Surveys of Consumers chief economist, Richard Curtin, said.

The US Dollar Index, which slumped to its lowest level in two weeks below 95, was last seen adding 0.23% on the day at 95.26. 

In addition to the USD's recovery, an improved market sentiment is also helping the pair hold above 112 on Friday. After recording their biggest 2-day decline since February on Wednesday and Thursday, major equity indexes started the last day of the week on a strong note as investors shifted their focus to third-quarter earnings. At the moment, both the Dow Jones Industrial Average and the S&P 500 are adding over 1%.

On the other hand, commenting on the recent collapse witnessed in stock markets, the BoJ Governor Haruhiko Kuroda argued that the recent surge in the US bond yields triggered a correction in the markets but there was no change to solid fundamentals in Japan, US, European economies. 

Technical outlook via FXStreet Chief Analyst Valeria Bednarik

The pair recovered some of its losses but is being capped by sellers around the 23.6% retracement of its latest daily decline a sign that bears retain control of the pair. The weekly chart shows that, after surpassing it the previous week, the pair is back trading below its 200 SMA but above the 100 SMA, while technical indicators retreat within positive levels, the Momentum pretty much neutral, and the RSI pulling back from overbought levels, skewing the risk toward the downside.

In the daily chart, the price is developing above its 100 and 200 DMA, both losing upward strength and with the shortest providing a dynamic support at around 111.50. Technical indicators in this last time frame have bounced back from their lows, but remain within negative readings, in line with additional declines ahead should the mentioned 111.50 level gives up. Below it next supports come at 110.80 and the psychological 100 level. The 38.2% retracement of the mentioned slump comes at 112.85, with gains above the level opening doors for a more steeper recovery up to the 113.40/60 price zone.


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