Bottom line: USDJPY short term outlook continues to remain bearish against 109.85 resistance. Bears might be preparing to reverse from 108.00/30 levels and push lower towards 105.00 in the short term. A break below 103.30 would be required to confirm further downside.

Fundamental Outlook:

NZDUSD has rallied since the beginning of this week from close to 0.6400 lows. The exchange rate has risen to 0.6490, almost a 100 pips. NZDUSD has indeed a strong correlation to risk assets and has been taking cues from Global Indices over the week. With a reversal in risk appetite, NZDUSD might come under pressure and break below 0.6400.

USDJPY had hit 108.16 levels before drifting lower again yesterday. The exchange rate is set for volatile movement as NFP is set to release today around 0830 AM EST. The USDJPY might gain further as Unemployment rate is projected at 12.3% versus 13.3%. It would be interesting to see the overall effect, since Japanese Yen is also anti-risk and tends to rise with fading risk appetite.

SPX500 has risen over +3.25% since the beginning of the week, and closed at 3111 yesterday. Futures are trading higher around 3120 as we prepare to publish. A boost in the ISM manufacturing numbers (52.6 against 49.5 projected), might have added to the rally yesterday. With the rising COVID-19 infections and US-China tensions, it might just be a matter of time before risk sentiment gives in.

Technical Analysis:

USDJPY might remain in control of bears if prices remain subdued below 109.85 interim resistance. The currency has manage to raise through 108.00 mark since hitting 106.00 lows recently, but faces intraday resistance around 108.30 levels.

USDJPY has been dropping since 112.22 highs and has managed to carve lower highs around 111.75, 109.85 respectively. Also note that 108.30 is fibonacci 0.618 retracement of the recent drop between 109.85 and 106.00 respectively.

Most traders might be willing to initiate fresh short positions around 108.30/40, with protective stop above 109.85 and projected downside targets below 105.00 and further. Only a break above 109.85 would change the above bearish structure.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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