Bottom line: USDJPY medium term outlook remains bearish against 112.22 resistance. Bears are looking to resume towards 101.50 and beyond, and a break below 107.40 interim support, would accelerate.

Fundamental Outlook:

USDJPY may come under pressure again as the US Dollar continues to drop against its peers. The US Dollar Index had dropped to 98.72 before pulling back yesterday. USDJPY remains vulnerable to further drop towards 105.00 levels.

NZDUSD had rallied over +1.5% on Tuesday and managed to close high at 0.6228, along with its counterpart AUDUSD. Even though risk assets managed to rally, NZDUSD could not capitalize and remained flat, closing below 0.6200 mark. It would be interesting to see how the currency would react over RBNZ’s continued dovish forward guidance.

SPX500’s party continues for now as the indice closed higher at 3036 yesterday, a +1.5% rise. Futures are trading almost flat around 3040, as we write this article. Investors should remain cautious though, since Equity Markets may witness a significant drop over several mounting issues: COVID-19 effect on economic slowdown, escalating US-China tensions, fear of infections rising as economies re-open post lock down.

Technical Analysis:

USDJPY bears might be back in control as the currency struggles to break above 108.00 levels. A break below 107.40 would accelerate the drop towards 105.00 at least. In the medium term, USDJPY could reach 101.50 before producing any meaningful pullback.

USDJPY had topped at 112.22 within the triangle consolidation earlier, and revered sharply towards 101.18 lows. Price action still remains subdued within the above drop, as the subsequent rally reversed lower from 111.75, the fibonacci 0.786 retracement. Ideally, until prices stay below 117.75 levels, USDJPY might be considered candidate to sell on rallies.

Immediate price resistance is seen towards 109.40/50 levels while support is seen towards 106.00 respectively. Traders might be willing to hold short positions against 112.22, with projected target below 101.50 in the next several weeks. 

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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