USD/JPY: All Eyes on 107.00 This Week
Matt Weller, CFA, CMT April 14, 2020 6:55 PM
Despite (or perhaps because of) signs of coronavirus “curve flattening” in the US, the greenback is among the day’s weakest major currencies...
Despite (or perhaps because of) signs of coronavirus “curve flattening” in the US, the greenback is among the day’s weakest major currencies. Meanwhile, the Japanese yen is holding up relatively well for a traditional safe haven currency on a generally “risk on” day (stocks up, bond yields down, gold flat).
A quick look at the USD/JPY daily chart reveals that this weak USD / strong JPY pattern has been playing out over the last week, taking the pair down from the mid-109.00s to test support near 107.00 as of writing:
Source: TradingView, GAIN Capital
As the chart above shows, the RSI indicator has already broken below its equivalent low from the start of the month, signaling that the selling pressure has grown over the last two weeks and that rates may be more likely to follow the indicator lower in the coming days. If USD/JPY does break support, bears may look to target the Fibonacci retracements of the March rally at 106.45 (50%), 105.20 (61.8%), and 103.45 (78.6%) next. On the other hand, if bulls can defend that line in the sand, the pair could bounce toward 108.00 or 109.00 by early next week.
Fundamentally speaking, the US retail sales report morning and initial unemployment claims on Thursday will be the key updates on the economic front over the rest of the week. Of course, traders remain hyper-focused on coronavirus news, especially regarding economies “restarting,” so that’s likely to trump (no pun intended!) any traditional economic data releases.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.