USD/JPY analysis: recovery contained by a critical resistance area
|USD/JPY Current price: 108.45
- Disappointing Japanese data may end up boosting the yen.
- US inflation triggered a nice comeback in USD/JPY, more gains still not clear.
- US Treasury yields resumed their advance, hit their highest in almost one month.
The USD/JPY pair is closing Thursday unchanged around 108.45, back from a daily low of 107.85, as sentiment toward the greenback changed following the release of better-than-anticipated US June inflation data, bringing some relief to dollar bulls. Equities kept rallying, with Wall Street moving further close to record highs, but also Treasury yields advancing. The benchmark 10-year yield rose to 2.13%, an almost one-month high, settling nearby at 2.12%. Japan released at the beginning of the day the June Tertiary Industry Index, which fell by 0.2%, worse than the -0.1% forecast and the previous 0.8% gain. As it has been happening for months, Japanese industry-related data has disappointed, indicating contracting activity in the sector and fueling concerns about the country’s economic health. This Friday, the country will release May Industrial Production and Capacity Utilization, with the first seen declining by 1.8% YoY.
USD/JPY short-term technical outlook
Despite recovering, the USD/JPY is trading below the 108.60/70 region, which draws a line between bears and bulls being in control of the pair. The 4 hours chart shows that the pair recovered from a directionless 100 SMA and that it also advanced above the 200 SMA, nearing now a flat 20 SMA, which stands in the middle of the mentioned resistance area. Technical indicators in the mentioned chart have recovered from oversold territory, with the Momentum advancing within negative territory and the RSI decelerating at around 52, suggesting a limited potential of further gains ahead.
Support levels: 108.35 108.00 107.65
Resistance levels: 108.70 109.00 109.40
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