USD/JPY analysis: bearish case remains strong

Valeria Bednarik FXStreet

USD/JPY Current price: 107.32

Dismissing the flash-crash, the pair hasn't been at this levels in over a year.
Demand for safe-haven assets will likely persist amid economic and political risks.

The USD/JPY pair has settled at 107.32, its lowest since the January flash-crash. Dismissing that particular event, the pair hasn't been this low since April 2018, something that Japanese monetary authorities noted, having started jawboning about the exchange rate on Friday. Equities soared this past week amid Fed's hinting rate cuts coming. The ECB and the RBA had also anticipated more stimulus coming, therefore giving stocks additional impulse. However, safe-haven assets were also on demand amid the usual concerns, named trade tensions and economic uncertainty. These last few days, geopolitical tensions between the US and Iran added fueled to the fire, sending US government bond yields to levels last seen in 2016. Nevertheless, US Treasury yields recovered some ground Friday with the benchmark yield for the 10-year note finishing the week at 2.05%. Early Monday, Japan will release the final version of the Leading Economic Index and the Coincident Index, expected to remain as initially estimated at 95.5 and 101.9 respectively.

The daily chart for the USD/JPY pair shows that it topped Friday at around the 38.2% retracement of the weekly decline at around 107.70, but trimmed gains ahead of the close to settle below the 23.6$ retracement of the same drop. The pair is developing below a firmly bearish 20 SMA which keeps heading lower well below the 100 and 200 SMA. The Momentum indicator heads marginally higher below its 100 line, but the RSI indicator remains directionless at 26, all of which favors further declines ahead. Shorter term, and according to the 4 hours chart, the pair is bearish, now developing below sharply bearish moving averages and with technical indicators having resumed their declines well into negative ground, after correcting oversold conditions.

Support levels: 107.05 106.65 106.30

Resistance levels: 107.70 108.10 108.50

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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