The USD/JPY currency pair pulled back on Friday to cut short the mid-week rebound after the US Producer Price Index data. The pair had rebounded to trade at around 108.500, just 0.500 below its weekly high of 109.000.
However, after the release of the US Producer Price Index around midday GMT, the pair pulled back to trade below the key level 108.000. It now appears to have turned the tide into a bearish wedge, which illustrates the recent reverse in market sentiment towards the greenback.
USD/JPY Fundamentals Overview
From a fundamental perspective, the USD/JPY currency pair is trading at the back of several US economic events.
While last week’s NFPs, which beat expectations of 160,000 jobs with 224,000 appeared to trigger a major channel bull-run, things have since reversed with the bears retaking control.
And on Friday, despite the US Producer Price Index beating expectations on all fronts, the currency pair pulled back from its weekly rebound amid continued trade tensions between the US and China.
Earlier on Friday, Japan’s Industrial Production missed expectation of 2.3% growth MoM with 2% growth. Traders will be looking forward to the CFTC Net Positions data later in the day for the US session.
USD/JPY Technical Analysis (the 60-min Chart)
From a technical viewpoint, the USD/JPY currency pair appears to have pulled back to trade in the oversold region of the Relative Strength Index Indicator. This could provide support for the pair preventing it from retesting the current weekly lows of about 107.862.
As such, the bulls will be targeting profits at around 108.149 going into next week while the bears will look to pounce by targeting profits at the 107.862 support level.
USD/JPY Technical Analysis (the Daily Chart)
In the daily chart, the USD/JPY currency pair appears to be under strong bearish pressure as it continues to trade within a descending wedge. This trend formed at the back of a major bull-run, which is illustrated using the Fibonacci Retracements.
Therefore, the bulls will target long-term profits at around the 50% Fib level at 108.529 while the bears will be hoping that the pullback continues towards the 38.20% Fib level at 107.566.
In summary, the USD/JPY currency pair’s pullback on Friday is reminiscent of the level of downward pressure it continues to face amid extended US-China trade tensions. As such, the bears will continue to retain control unless something changes fundamentally.