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USD/JPY Starts Fresh Rebound, Could Test 110.40

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Aayush Jindal

Key Highlights

  • The US Dollar found support near 109.02 after astrong decline against the Japanese Yen.
  • USD/JPY recovered after it traded above acontracting triangle with resistance at 109.58 on the 4-hours chart.
  • The US Initial Jobless Claims for the weekending May 11, 2019 declined from 228K to 212K.
  • The Michigan Consumer Sentiment Index in May2019 (Prelim) could rise from 97.2 to 97.5.

USDJPY Technical Analysis

After a strong rejection near 112.00, the US Dollar fell significantly against the Japanese Yen. The USD/JPY pair traded as low as 109.02, and recently started a decent recovery above 109.20 and 109.50.

USDJPY Technical Analysis US Dollar Japanese Yen

Looking at the 4-hours chart, the pair is currentlyrebounding, but it is still in a bearish zone below 110.70 and the 100 simplemoving average (4-hours, red).

It recently broke the 23.6% Fib retracement level of thedrop from the 111.70 swing high to 109.02 swing low. Besides, there was a breakabove a contracting triangle with resistance at 109.58 on the same chart.

On the upside, the next resistance is near the 110.30-110.40zone (the previous support). Moreover, the 50% Fib retracement level of thedrop from the 111.70 swing high to 109.02 swing low is near 110.36 to act as astrong resistance.

If there are further gains, USD/JPY could test the 110.70resistance and the 100 simple moving average (4-hours, red).

Conversely, if the pair fails to move above 110.10 or 110.40,it could start a fresh decline. On the downside, the key support is at 109.40,below which the pair is likely to revisit 109.02.

Fundamentally, the US Initial Jobless Claims figure for theweek ending May 11, 2019 was released by the US Department of Labor. The marketwas looking for a decline from 228K to 220K.

The actual result was better than the forecast, as there wasa decline in the US Initial Jobless Claims to 212K. Besides, the 4-week movingaverage was 225K, up 4,750 from the previous week's unrevised average of220,250.

The report added:

The advance number for seasonally adjusted insured unemployment during the week ending May 4 was 1,660,000, a decrease of 28,000 from the previous week's revised level. The previous week's level was revised up 4,000 from 1,684,000 to 1,688,000.

Overall, there are chances of more upsides in USD/JPY towards 110.40, but other major pairs like EUR/USD, GBP/USD and AUD/USD are likely to struggle.

Economic Releases to Watch Today

  • Euro Zone CPI for April 2019 (YoY) - Forecast +1.7%,versus +1.7% previous.
  • Euro Zone CPI for April 2019 (MoM) - Forecast+0.7%, versus +1.0% previous.
  • Michigan Consumer Sentiment Index May 2019(Prelim) – Forecast 97.5, versus 97.2 previous.
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