USD/JPY technical analysis: Offered near 5-day MA, hits fresh 5.5-month low on risk-off

USD/JPY hits lowest since early January.
Asian stocks drop, Shanghai Composite sheds more than 1.5%.
Anti-risk JPY is gaining ground amid risk aversion.

Omkar Godbole FXStreet Contributor

The bid tone around the anti-risk Japanese Yen has strengthened amid risk aversion in the Asian stock markets.

USD/JPY is currently trading at 107.03, the lowest level since Jan. 3, having faced rejection at the descending (bearish) 5-day moving average resistance at 107.41 earlier today.

The Asian stocks are flashing red with the Shanghai Composite shedding 1.63% at press time. Meanwhile, the FTSE China A50 index is down 2.39% and the stocks in Hong Kong are down more than 0.7%. The futures on the S&P 500 are also down 0.18 percent.

China's stocks are losing ground despite the talk of targeted rate cuts. The losses in equities and USD/JPY likely indicate the investors see a low probability of US and China reaching a trade deal in the near future. Chinese President Xi Jinping is expected to meet the US President Donald Trump on the sidelines of the Group of 20 summit in Osaka. The meeting is expected to take place on Saturday.

Also, Yen may have picked up a bid in response to report by Bloomberg that Trump recently mused to confidants about withdrawing from a longstanding defense treaty with Japan.

Looking forward, the pair looks set for a break below 107.00, as the daily chart is reporting bearish conditions with a falling channel and descending 5- and 10-day moving averages.

A break above 108.80 (June 11 high) is needed to revive the bullish outlook.

Daily chart

Trend: Bearish

Pivot points

1. R3 107.77
2. R2 107.65
3. R1 107.48
PP 107.36
1. S1 107.18
2. S2 107.07
3. S3 106.89

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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