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USD/JPY Starts Fresh Increase, US GDP Grows 4%

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Aayush Jindal

Key Highlights

  • USD/JPY started a fresh increase above the main 104.00 resistance.
  • There was a break above a major bearish trend line at 103.80 on the 4-hours chart.
  • The US Gross Domestic Product grew 4% in Q4 2020 (Preliminary).
  • The US Personal Income is likely to increase 0.1% in Dec 2020 (MoM).

USD/JPY Technical Analysis

The US Dollar started a fresh increase after forming a base above 103.20 against the Japanese Yen. USD/JPY broke the 103.80 and 104.00 resistance levels to move into a positive zone.

Looking at the 4-hours chart, the pair settled nicely above the 104.00 level, the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours). There was also a break above a major bearish trend line at 103.80 on the same chart.

Finally, there was a break above the 76.4% Fib retracement level of the downward move from the 104.39 high to 103.32 low. It opened the doors for more upsides above 104.30.

The next major resistance could be 104.65. It is close to the 1.236 Fib extension level of the downward move from the 104.39 high to 103.32 low. On the downside, the 104.10 and 104.00 levels are likely to provide support if there is a short-term correction.

Fundamentally, the US Gross Domestic Product for Q4 2020 (Preliminary) was released yesterday by the US Bureau of Economic Analysis. The market was looking for a 3.9% rise in the GDP.

The actual result was better than the forecast, as the US Gross Domestic Product grew 4% in Q4 2020 according to the "advance" estimate.

The report added:

The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States.

Overall, USD/JPY broke a major hurdle at 104.00 and it might continue to rise. Looking at EUR/USD, the pair corrected towards 1.2050 before recovering losses. GBP/USD too corrected towards 1.3650, where it found a strong support.

Economic Releases

  • Germany’s Unemployment Change for Dec 2020 - Forecast 3K, versus -37K previous.
  • Germany’s Unemployment Rate for Dec 2020 – Forecast 6.1%, versus 6.1% previous.
  • US Personal Income for Dec 2020 (MoM) - Forecast +0.1%, versus -1.1% previous.
  • US Pending Home Sales for Dec 2020 (MoM) - Forecast -0.1%, versus -2.6% previous.
  • Canadian Gross Domestic Product for Nov 2020 (MoM) – Forecast +0.4%, versus +0.4% previous.
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