USD/JPY Consolidates Below 106.500 After Facing Strong Resistance

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The USD/JPY currency pair has this week continued to trade in a consolidative pattern formation around 106.200 after attempting a rebound. The currency pair made a sharp rebound on Wednesday to top 107.00 but it has since pulled back to stabilize just above 106.300.

The pair is trading in a consolidative triangular formation which, based on the strong base supported by the 100-hour and the 200-hour MA line could lead to a bullish breakout.

USD/JPY Fundamentals Overview

The USD/JPY currency pair is trading after a week of mixed US data that slightly leaned on the positive side. Japan also had a mixed bag of data during the week led by the Producer Price Index, which missed expectations with -0.6% (YoY) for July versus -0.5%. 

Tertiary Industry Index was in line with exp[ectations at -1.1% while Machine Tools Orders registered a decline of 33% a small improvement from -38% in the previous period. However, Machinery Orders (YoY) and (MoM) for June impressed with 12.5% and 13.9% growth respectively versus a forecast of -0.6% and -1.3%. Japan’s Industrial Production data also beat expectations with 3.8% (YoY) and 3.3% (MoM).

On the other hand, the US Consumer Price Index was impressive early on in the week, as depicted by the sharp rise in the USD/JPY currency pair. Retail Sales also beat expectations while continuing and initial jobless claims missed.

USD/JPY Technical Analysis (the 60-min Chart)

Technically, the USD/JPY currency pair appears to be trading within the normal zone in the Relative Strength Index Indicator. Therefore, the consolidative triangular pattern formation could continue through next week unless something major happens.

Therefore, the bulls will target short-term profits at around 106.500 or higher at 106.771 while the bears will look to pounce by targeting pullbacks at 106.074 or lower at 105.762.

USD/JPY Technical Analysis (the Daily Chart)

In the daily chart, the USD/JPY currency pair appears to be trading within a descending channel, which indicates a bearish bias in the market sentiment towards the pair. It has recently made a rebound off the trendline support but the pair has failed to advance above 106.837 amid momentum exhaustion.

This could result in a short-term pullback as the pair looks to consolidate below 107.000. Therefore, the bears will target long-term profits at around 105.034 while the bulls will target a breach of the 107.000 level by targeting long-term profits at around 107.326.

In summary, the USD/JPY currency pair appears to be experiencing strong bearish pressure in the daily chart but this does not rule out profitable rebounds along the way. The bulls will be keeping an eye on them.

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