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USD/JPY Breaks Key Resistance, Oil Price Extends Its Rise

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Aayush Jindal

Key Highlights

  • USD/JPY climbed above the key 105.50 and 105.80 resistance levels.
  • Crude oil price extended its rise above the $40.00 and $41.00 resistance levels.
  • The UK GDP is likely to grow 4.6% in August 2020 (MoM), down from the last +6.6%.
  • Canada’s Unemployment Rate could drop from 10.2% to 9.7% in Sep 2020.

USD/JPY Technical Analysis

After a downside correction, the US Dollar found support near 105.00 against the Japanese Yen. USD/JPY started a fresh increase above 105.40 and surpassed a few important hurdles.

Looking at the 4-hours chart, the pair traded as low as 104.92 before climbing back above 105.00. There was a break above the 105.65 and 105.80 resistance levels. Moreover, the pair broke a major bearish trend line at 105.70.

It settled nicely above 105.80, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). On the upside, the first major resistance is near the 106.40 level, above which the pair is likely to face a strong selling interest near the 106.80 level.

If there is a downside correction, the pair might find support near the 105.80 level. The first key support is near the 105.65 level and the 200 simple moving average (green, 4-hours). The main support is near the 105.50 level, below which there is a risk of a fresh decline towards 105.00.

Fundamentally, the US Initial Jobless Claims figure in the week ending Oct 03, 2020 was released yesterday by the US Department of Labor. The market was looking for a decline from 837K to 820K.

The actual result was disappointing, as the US Initial Jobless Claims came in at 840K. Besides, the last reading was revised up from 837K to 849K.

The report added:

The 4-week moving average was 857,000, a decrease of 13,250 from the previous week's revised average. The previous week's average was revised up by 3,000 from 867,250 to 870,250.

Overall, USD/JPY might correct lower, but it is likely to find support near 105.80 or 105.65. Looking at EUR/USD, the pair is still facing a strong resistance near 1.1800. Similarly, GBP/USD needs to clear 1.3000 for a steady increase in the coming days.

Upcoming Economic Releases

  • UK Industrial Production for August 2020 (MoM) - Forecast +2.5%, versus +5.2% previous.
  • UK Manufacturing Production for August 2020 (MoM) - Forecast +3.0%, versus +6.3% previous.
  • UK GDP for August 2020 (MoM) - Forecast +4.6%, versus +6.6% previous.
  • Canada’s employment Change for Sep 2020 – Forecast 156.6K, versus 245.8K previous.
  • Canada’s Unemployment Rate for Sep 2020 - Forecast 9.7%, versus 10.2% previous.
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