USD/JPY Analysis: neutral as fear dominates the fundamental background
|USD/JPY Current Price: 106.27
- Japan August Nikkei Manufacturing PMI most likely held into contraction territory.
- Risk-related sentiment fragile despite the latest decline in safe-havens’ assets.
- USD/JPY could resume its decline on a break below 106.00.
The USD/JPY pair settled at 106.25, up for the week but within familiar levels, and having posted a lower low at 104.44. The pair topped at 106.67 on Thursday, following news that the US and China will try to de-escalate their trade war, but failed to extend gains on Friday, as US Treasury yields edged marginally lower, with the yield on the benchmark 10-year note settling at 1.499%. Wall Street closed mixed with the major indexes not far from their opening levels amid a prevalent cautious stance, given that, despite all the positive jawboning, a new round of US tariffs on some Chinese goods will take effect ahead of the weekly opening.
Japanese data keeps signaling an economic slowdown
Data coming from Japan was mostly disappointing, as August Tokyo inflation came in 0.6% when compared to a year earlier, while the core reading which excludes fresh food resulted at 0.7% YoY as expected. The unemployment rate in July improved to 2.2%, while the preliminary estimate for Industrial Production in the same month beat expectations rising by 1.3%. Retail Trade, on the other hand, disappointed, falling by 2.0% while Large Retailer’s Sales was down by 4.8%. Housing Starts fell by less than anticipated, down anyway by 4.1%. The August Nikkei Manufacturing PMI will be out this Monday, previously at 49.5.
USD/JPY short-term technical outlook
The USD/JPY pair is trading around the 38.2% retracement of its August decline measured between 109.31 and 104.44, while the 50% retracement of the same figure is located at 106.85, providing an immediate resistance. Technical indicators on the daily chart have lost their directional strength, the Momentum within positive levels but the RSI at 46, this last keeping the risk skewed to the downside. In the mentioned chart the pair is barely holding above a flat 20 DMA while the larger ones keep heading south far above the current price. In the shorter term, and according to the 4 hours chart, the pair offers a neutral stance, barely holding above its 20 and 100 SMA but below the 200 SMA, which converges with the mentioned Fibonacci resistance, as technical indicators ease within neutral levels.
Support levels: 106.00 105.75 105.30
Resistance levels: 106.85 107.10 107.30
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