USD/JPY Forecast: Consolidating losses, risk skewed to the downside

USD/JPY Current price: 103.79

  • Japanese National inflation contracted by more than anticipated in October.
  • US Treasury Secretary Mnuchin asked the Fed to return unused funds.
  • USD/JPY is trading near weekly lows without directional momentum.

The USD/JPY pair consolidates weekly losses in the 103.70 price zone, amid the persistent dollar’s weakness. The American currency suffers from coronavirus-related jitters, as more US states impose restrictive measures to curb the spread of the virus.

Late Thursday, US Treasury Secretary Steven Mnuchin sent a letter to Fed’s chair Jerome Powell, asking to return unused funds from five emergency programs. It’s unclear what’s behind such a decision, particularly considering that the Federal Reserve has been calling for additional support for the economy. Mnuchin claims that Congress would then be able to use the money for other purposes.

Japan published at the beginning of the day the October National inflation,  which came in worse than anticipated at -0.4% YoY. The core CPI matched expectations printing -0.7% YoY. The country also released the November preliminary Jibun Bank Manufacturing PMI that contracted to 48.3 from 48.7. The US won’t publish macroeconomic data this Friday.

USD/JPY short-term technical outlook

The risk for the USD/JPY pair is on the downside. The 4-hour chart shows that the pair continues trading below a firmly bearish 20 SMA, which extended its decline below the larger ones. Technical indicators lack directional strength, holding within negative levels. The immediate support level is 103.50, with a break below it exposing the monthly low at 103.17.

Support levels: 103.50 103.15 102.80

Resistance levels: 104.00 104.30 104.75  

 View Live Chart for the USD/JPY

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