USD/JPY Poised to Extend Declines Below 111.00

Key Highlights

  • The US Dollar failed to stay above the 112.00 support area and declined against the Japanese Yen.
  • USD/JPY is now well below the 112.00 support, which is a strong bearish sign.
  • A major support sits at 111.00 where buyers may attempt to prevent further losses.
  • Other major pairs such as EUR/USD and GBP/USD recently gained bullish traction.

USDJPY Technical Analysis

The US Dollar was not able to break the 113.80 and 114.00 resistance levels and moved down sharply versus the Japanese Yen. The USD/JPY pair is now in a bearish zone and poised to extend declines in the near term.

USDJPY Technical Analysis US Dollar Japanese Yen

It seems like 2018 brought a lot of strength for the Japanese Yen since it gained a lot of bids against the US Dollar. USD/JPY failed to break a crucial bearish trend line with current resistance at 113.30 on the 4-hours chart.

A sharp downside wave was initiated and the pair tumbled below the 100 (red) and 200 (green) simple moving averages (4-hour). More importantly, there was a break below a key support at 112.00. The stated 112.00 support prevented declines on many occasions earlier. Therefore, a break and close below 112.00 suggests that the Japanese Yen buyers gained a lot of strength lately.

The pair traded as low as 111.04 recently and is attempting a recovery. However, the upside move may be capped by the 23.6% Fib retracement level of the last major decline from the 113.38 high to 111.04 low.

At the moment, the pair is showing signs of further weakness. A critical support on the downside sits at 111.00. Should USD/JPY drop below the 111.00 level, the pair could accelerate losses towards the 110.00 level in the near term.

To the topside, the previous support at 112.00 will most likely act as a resistance. Technically, indicators such as the RSI is showing negative signs.

Looking at the other major US dollar pairs, EUR/USD was able to move higher above the 1.2000 level. The main driving force for the Euro were the ECB minutes released yesterday, which pointed a solid recovery in the Euro Zone in the long run. GBP/USD also gained bullish traction and moved higher towards the 1.3580 level.

Today’s US Consumer Price Index for Dec 2017 will be released. The market is aligned for an increase of 2.1% (YoY), down from the last 2.2%. If the outcome is positive, USD/JPY may recover in the short term toward 112.00. On the other hand, a negative outcome could further increase bearish pressure on the greenback.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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