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USD/JPY: Key Support Nearby, 110.00 Remains Key Hurdle

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Aayush Jindal

Key Highlights

  • USD/JPY is trading above a major support near 109.00.
  • A key rising channel is in place with support near 109.10 on the 4-hours chart.
  • EUR/USD and GBP/USD are consolidating above 1.2120 and 1.4100 respectively.
  • The US CPI increased 5% in May 2021 (YoY), more than the market forecast of 4.7%.

USD/JPY Technical Analysis

The US Dollar failed to surpass the 110.35 level and corrected lower against the Japanese Yen. USD/JPY declined below 110.00, but it remained well bid above the 109.00 level.

Looking at the 4-hours chart, the pair traded as low as 109.18 and recently climbed higher. Besides, it remained stable and well above the 109.00 zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

On the upside, an initial resistance is near the 109.75 level. It is close to the 50% Fib retracement level of the recent decline from the 110.33 high to 109.18 low.

The main resistance is near the 110 level, above which the pair could even attempt a break above the 110.33 high in the near term. Conversely, the pair could correct lower towards the 109.20 support.

There is also a key rising channel in place with support near 109.10 on the same chart. The next major support is near the 109.00 level, below which the pair could decline towards the 108.40 level.

Fundamentally, the US Consumer Price Index for May 2021 was released yesterday by the US Bureau of Labor Statistics. The market was looking for an increase of 4.7% compared with the same month a year ago.

The actual result was above the market forecast, as the US Consumer Price Index increased 5% in May 2021 (YoY), up from the last 4.2%. Looking at the monthly change, there was a 0.6% rise in the CPI, down from the last 0.8%.

The report added:

The index for all items less food and energy rose 0.7 percent in May after increasing 0.9 percent in April. The all-items index rose 5.0 percent for the 12 months ending May; it has been trending up every month since January, when the 12-month change was 1.4 percent.

Looking at EUR/USD, the pair is trading nicely above the 1.2120 support, but also facing hurdles near 1.2200. Similarly, GBP/USD is struggling to gain pace above 1.4200 and 1.4220.

Economic Releases

  • UK Industrial Production for April 2021 (MoM) - Forecast +1.2%, versus +1.8% previous.
  • UK Manufacturing Production for April 2021 (MoM) - Forecast +1.5%, versus +2.1% previous.
  • UK GDP for April 2021 (MoM) - Forecast +2.4%, versus +2.1% previous.
  • Michigan Consumer Sentiment Index for July 2021 (Prelim) – Forecast 84.0, versus 82.9 previous.
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