USD/JPY Forecast: Sour sentiment helps the JPY

Valeria Bednarik FXStreet

USD/JPY Current price: 106.33

Japan’s economic contraction hit an annualized record low of -27.8%.
Coronavirus concerns weighed on investors’ mood, which favor safe-haven assets.
USD/JPY is pressuring a Fibonacci support level and at risk of falling further.

The USD/JPY is down at the beginning of the week as the mood is somehow depressed. No major developments took place over the weekend, although investors are concerned about the pandemic-developments. The number of global daily cases is averaging 260K this August, with new restrictive measures being announced in different countries.

Adding to the sour sentiment, Japan reported Q2 GDP, which came in at -7.8% for the three months to June, down at an annualized pace of 27.8%, worse than anticipated. The country also reported June Industrial Production which fell 18.2% YoY, and Capacity Utilization, which was up 1.9% in the month. The US will have a light start to the week as it will publish a minor report, the August NAHB Housing Market Index, foreseen at 73 from 72 in the previous month.

USD/JPY short-term technical outlook

The USD/JPY pair is trading at daily lows and piercing the 23.6% retracement of its latest bullish run. The short-term picture is bearish as the pair has extended its decline below its 20 SMA, which now gains bearish strength. Technical indicators, in the meantime, accelerate their declines within negative levels, in line with a downward extension on a break below 106.20, the immediate support.

Support levels: 106.20 105.90 105.50

Resistance levels: 106.65 107.05 107.45

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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