USD/JPY Sets New Weekly Lows as Monthly Rally Suffers Exhaustion

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The USD/JPY currency pair pulled back late on Friday to extend losses towards a new weekly low of about 107.591. The currency pair appears to be suffering momentum exhaustion following the 2-week rally it underwent earlier this month.

The pair is trading in a sloping curve and this shows a diminishing upward momentum, which is shortly followed by an accelerating downward movement. This trend could continue through next week as the pair dives to form a cone-shaped pattern.

USD/JPY Fundamentals Overview

From a fundamental perspective, the USD/JPY currency pair is trading at the back of a busy week in both markets. In Japan, the National CPI missed expectations of 0.6% with 0.3%. However, the equivalent figures for the same ex=fresh food beat with 0.5% versus 0.4% while ex-food and energy also surprised expectations of 0.5% for August with 0.6%.

The Bank of Japan (BoJ) held interest rates steady at -0.1% as expected while the ALL Industry Activity Index for July (MoM) improved by 0.2% compared to -0.7% change in the previous period.

On the other hand, the US cut interest rates by 25 basis points as expected and is now expected to pump some $150 billion to the economy through asset purchases. Trade war with China has eased in recent weeks but could resurface any time next month.

The US continuing jobless claims beat expectations with 1.661M (Sep. 6, week) versus 1.672M while the initial claims came in at 208k (Sep. 13, week) beating the projected figure of 213k.

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

The USD/JPY currency pair appears to have recently retreated towards the oversold levels in the relative strength index indicator of the 60-min chart. This comes following the recent pullback that came at the end of a major rally.

Therefore, the bears will be targeting short-term profits at around 107.265 or lower at 106.931. On the other hand, the bulls will hope for an immediate rebound towards 107.968 or high at 108.291.

USD/JPY Technical Analysis (the Daily Chart)

In the daily chart, the USD/JPY currency pair appears to have recently made a pullback off the trendline resistance just above the 100-day moving average line. The 200-day MA line is positioned just a few pips higher and this supports the case of a bearish pressure overall.

The pair seems to be enjoying a strong support base at around 104.500 and this will be a good target for the bears. More bearish opportunities can be found at 106.537 and 106.389. On the other hand, the bulls will target long-term profits at around 108.999, 109.926, 111.059 and 112.034.

In summary, the USD/JPY currency pair appears to be trading under strong bearish pressure in both short-term and long-term markets and this gives the bulls a lot of optimism going into next week.

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