USD/JPY Forecast: Limited bullish scope

Valeria Bednarik FXStreet

USD/JPY Current price: 106.26

Japanese Chief Cabinet Secretary Yoshihide Suga announced his bid to replace PM Abe.
Treasury yields ended the day with modest losses, capping advances for USD/JPY.
USD/JPY is pressuring daily highs, but a bullish extension still unclear.

The USD/JPY traded as high as 106.29 this Wednesday, underpinned by the persistent dollar’s demand. The pair peaked during US trading hours, even though US data failed to impress. Rising equities helped to keep the pair afloat, but lower government debt yields capped the upside. Treasury yields started the day with a positive tone, but shed ground as the day went by, ending it in the red, with that on the 10-year note down to 0.64%.

News at the beginning of the day showed that Japan’s Chief Cabinet Secretary Yoshihide Suga announced his candidature to replace PM Abe. Suga is among the favorite candidates towards the election vote to take place next September 14. Should he be elected the next Prime Minister, the most likely scenario is that he will continue the current policy. Early Thursday, Japan will publish the Jibun Bank Services PMI for August, previously at 45.4.

USD/JPY short-term technical outlook

The USD/JPY pair has continued to advance, but it is unclear whether it could move further up. The 4-hour chart shows that it settled above all of its moving averages, which remain in a well-limited range. The 20 SMA has turned higher but remains below the larger ones. The RSI indicator grinds slowly higher currently at 57, but the Momentum indicator eased within positive levels. The pair would be better poised to extend its advance once above 106.35, the immediate resistance level.

Support levels: 105.90 105.50 105.10

Resistance levels: 106.35 106.70 107.10

View Live Chart for the USD/JPY

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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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