Bottom line: USDJPY short to medium term wave structure remain bearish against 109.85 intermediary resistance. The currency pair is struck within a trading range between 107.30 and 107.80 since last few trading sessions.

Fundamental Outlook:

NZDUSD managed to rally testing June 2020 highs at 0.6585 yesterday. The rally across risk assets helped the New Zealand Dollar gain against the USD, despite the steady rise of COVID-19 infections in the United States along with Brazil and other Asian countries.

USDJPY came under pressure again and dropped to monthly lows around 107.15 before finding some support. The US Dollar Index dropped to 96.40 as EUR, GBP, CHF, AUD gained alongside Global Equity Markets. Gold also broke the $1800 mark and registered new highs at $1818 yesterday.

SPX500 futures rallied close to +1.0% and closed around 3175, alongside Dow Jones futures as the euphoria continues across Global Equity Markets. With COVID-19 infections crossing the 3 million mark in the United States, and the Q2 earning season ahead, it remains to be seen how long the party continues. Believe it or not, one fundamental event might be enough to trigger a massive risk aversion.

Technical Analysis:

USDJPY has dropped to its potential support zone around 107.30 mark. Probability remains for a bullish turn from current levels, that could push the currency through 108.30/40 levels before reversing lower again.

USDJPY had earlier dropped from 111.75 through 106.00 as an impulse wave. The subsequent rally towards 109.85 was corrective, as the general guideline suggests. Further it had reached the fibonacci 0.618 retracement of the above drop around 109.85 levels.

USDJPY might be working to produce a counter trend rally through 108.30 levels, which is fibonacci 0.618 of the recent drop between 109.85 and 106.00 respectively. A bearish reversal from there might trigger fresh short positions as traders prepare to resume lower again.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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