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USD/JPY Struggling To Gain Bullish Momentum

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Aayush Jindal

Key Highlights

  • The US Dollar started a decent recovery from105.05 against the Japanese Yen.
  • USD/JPY is facing many key resistances near107.00 and 107.20.
  • The US Manufacturing PMI declined from 50.4 to49.9 in August 2019 (119-month low) (Prelim).
  • Jackson Hole Symposium and G7 Meeting could impactthe market sentiment in the short term.

USD/JPY Technical Analysis

This past month, the US Dollar started a significant decline from 109.30 against the Japanese Yen. The USD/JPY pair traded as low as 105.04 and recently started an upside correction.

USD/JPY Technical Analysis US Dollar Japanese Yen

Looking at the 4-hours chart, the pair recovered above the105.40 resistance, a connecting bearish trend line, and the 105.80 pivot level.Moreover, there was a break above the 23.6% Fib retracement level of the downwardmove from the 109.31 high to 105.04 low.

However, the pair faced a strong resistance near 106.80,107.00, and the 100 simple moving average (red, 4-hours). More importantly, the50% Fib retracement level of the downward move from the 109.31 high to 105.04low is near the 107.20 level.

The 200 simple moving average (green, 4-hours) is alsopositioned near 107.40 to prevent further gains. Therefore, USD/JPY must climbabove the 107.00 resistance and gain momentum above 107.20 to continue higher.

Conversely, if there is no upside break above 107.20, thepair is likely to restart its downward move. An immediate support is near the106.00 level, below which the pair is likely to test the 105.40 support. Anyfurther downsides could trigger a move towards the 105.04 swing low.

Fundamentally, the Manufacturing Purchasing Managers Index(PMI) for August 2019 (Prelim) was released by the Markit Economics. The marketwas looking for a minor increase from 50.4 to 50.5.

The actual result was disappointing, as there was a declinein the PMI to 49.9 (119-month low). Moreover, the US Services PMI declined from53.0 to 50.9, well below the market forecast of 50.9.

The report added:

August data signalled a renewed slowdown in the rate of U.S. private sector business activity growth. The seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index dipped from 52.6 in July to 50.9 in August, to signal only a slight increase in business activity and the slowest pace of expansion for three months.

Overall, USD/JPY might struggle to continue higher above 107.20, while GBP/USD spiked higher in the past few sessions. Besides, EUR/USD is still trading in a bearish zone below the 1.1150 level.

Upcoming Economic Releases

  • US New Home Sales for July 2019 (MoM) – Forecast-0.2% versus +7.0% previous.
  • G7 Meeting.
  • Jackson Hole Economic Policy Symposium.
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