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USD/JPY Breakdown Looks Real Below 107.50

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Aayush Jindal

Key Highlights

  • USD/JPY started a major decline from well above the 109.00 level.
  • The pair traded below many key supports near 108.00 and 107.50.
  • The US Initial Jobless Claims in the week ending June 06, 2020 declined from 1897K to 1542K.
  • The US Import Price Index is likely to increase 0.6% in May 2020 (MoM).

USD/JPY Technical Analysis

After a significant upside break near 108.00, the US Dollar surged above 109.00 against the Japanese Yen. However, USD/JPY failed to extend its rise and recently declined more than 200 pips.

Looking at the 4-hours chart, the pair traded as high as 109.84 before it started declining. It failed to stay above the key 108.00 support zone and weakened more than 200 pips.

There was a break below a connecting bullish trend line with support at 107.35 on the same chart. Besides, the pair settled traded below the last swing low at 107.08, plus settled below the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

It seems like the pair could extend its decline towards the 106.50 level or the 1.236 Fib extension level of the last major upward move from the 107.08 low to 109.84 high.

Any further losses could lead the pair towards the 106.20 level. Conversely, the pair is likely to face hurdles near the 107.50 and 108.00 levels if there is an upside correction.

Fundamentally, the US Initial Jobless Claims figure for the week ending June 06, 2020 was released by the US Department of Labor. The market was looking for a decline from 1877K to 1550K.

The actual result was close to the forecast, as the US Initial Jobless Claims declined to 1542K. However, the last reading was revised up from 1877K to 1897K.

The report added:

The 4-week moving average was 2,002,000, a decrease of 286,250 from the previous week's revised average. The previous week's average was revised up by 4,250 from 2,284,000 to 2,288,250.

Overall, USD/JPY remains at a risk of more downsides towards 106.50. Looking at EUR/USD, the pair retreated from the 1.1400 region, and GBP/USD faced a strong selling interest near the 1.2800 level after a significant rally.

Upcoming Economic Releases

  • UK Industrial Production for April 2020 (MoM) - Forecast -15.8%, versus -4.6% previous.
  • UK Manufacturing Production for April 2020 (MoM) - Forecast -15.0%, versus -4.2% previous.
  • UK GDP for April 2020 (MoM) - Forecast -18.4%, versus -5.8% previous.
  • US Import Price Index May 2020 (MoM) – Forecast +0.6%, versus -2.6% previous.
  • US Export Price Index May 2020 (MoM) – Forecast +0.6%, versus -3.3% previous.
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