Bottom line: USDJPY outlook remains bearish until prices stay below the 112.22 resistance levels. Bears remain poised to push below 106.00 levels in the short term and subsequently below 101.50 mark.

Fundamental Outlook:

NZDUSD managed to hit monthly highs at 0.6157 yesterday after Reserve Bank of New Zealand kept OCR unchanged to 0.25% in the monetary policy meet held last week. Though the RBNZ has ruled out possibilities of a Negative Interest Rates Policy in the near term, more stimulus would be required to overcome the COVID-19 effect on the economy. RBNZ is expected to maintain a dovish guidance over the next meet as well.

SPX500 had managed to print yet another monthly high around 2980 yesterday, before closing at 2972. The indice managed to close the day higher by over +1.5% after opening gap up. The optimism over a potential COVID-19 drug invention (though it is far from reach) and hopes of US economic recovery as states continue to re-open, has stimulated risk sentiment this week.

Technical Analysis:

USDJPY medium term outlook continues to remain bearish as prices trade below 112.22 resistance. Bulls had managed to rally towards 108.00 in the past week, before finding resistance again. Interim support is seen around 106.00, and a push lower could trigger further sell off towards 105.00 and 103.00, going forward.

USDJPY weekly structure is indicating that a corrective phase is underway since 125.85 levels and could complete around 96.00 before turning bullish again. Please note that fibonacci 0.618 retracement is also seen close to 94.00/95.00 levels and a bullish ounce remains high probability.

A consistent break below 103.00 would confirm that above bearish structure is intact and that bears are inclined to push lower towards 96.00, going forward. Alternately, a push above 111.00 mark would threaten to break 112.22 resistance and change the wave structure.

Traders might continue to hold short positions with a protective stop above 112.22 for now. The projected downside targets remain 101.00 and 96.00 respectively.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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