Bears of the USD/JPY currency pair retain short-term control despite a disappointing series of Japanese economic data released this week. The currency pair has been trading in a sharply descending channel since the start of the week. This indicates a short-term bearish bias in the market sentiment.
The currency pair has benefited from risk-off trading amid an outbreak of the coronavirus. As of yesterday, 830 cases had been confirmed in China.
USD/JPY Fundamentals Overview
From a fundamental perspective, the USD/JPY currency pair is trading at the back of a relatively busy period in the Japanese market. This comes hand in hand with the coronavirus scare that has prompted increased risk-off trading. Safe-haven currencies like the Japanese Yen have thus benefited this week.
On Monday, the Japanese Industrial Production for November narrowly missed the (YoY) expectation of -8.1% with -8.2%. The (MoM) change also came short of expectation while capacity utilization missed with -0.3% versus 0.7%. On Tuesday, the bank of Japan said it will keep the easing program running and kept interest rates unchanged at 0.1%.
On Wednesday, Adjusted Merchandise Trade Balance and the Total Trade Balance for December missed expectations. Imports and Exports also missed the (YoY) expectations of -3.4% and -4.2%, respectively with -4.9% and -6.3%. And on Thursday, the Coincidence Index and the Leading Economic Index disappointed with 94.7 and 90.8, respectively, versus the expectations of 95.1 and 90.9.
USD/JPY Technical Analysis (the 60-min Chart)
Technically, the USD/JPY currency pair appears to be trading under intense short-term bearish pressure. This comes at the back of a major reversal last week, which ended the start of year rally. The pair has now retracted by more than 40% as demonstrated using the Fibonacci retracements.
Therefore, the bears will be targeting short-term profits at around 109.075 or lower at 108.803, at 50% and 61.80% Fib levels, respectively. On the other hand, the bulls will target rebound profits at around the 23.40% Fib level at 109.688 or higher at 109.982.
USD/JPY Technical Analysis (the Daily Chart)
In the daily chart, the USD/JPY currency pair continues to trade in an ascending channel which shows a long-term bullish bias in the market sentiment. This comes after bottoming at around 104.446in August last year. The pair has recently pulled back to return to the normal trading zone of the RSI indicator in the daily chart.
Therefore, the bears will target long-term profits at around 108.373 or lower at 107.121. On the other hand, the bulls will look to keep the momentum by targeting profits at around 110.238 or higher at 111.665.