USD/JPY Struggling To Gain Bullish Momentum

Key Highlights

  • The US Dollar started a decent recovery from 105.05 against the Japanese Yen.
  • USD/JPY is facing many key resistances near 107.00 and 107.20.
  • The US Manufacturing PMI declined from 50.4 to 49.9 in August 2019 (119-month low) (Prelim).
  • Jackson Hole Symposium and G7 Meeting could impact the market sentiment in the short term.

USD/JPY Technical Analysis

This past month, the US Dollar started a significant decline from 109.30 against the Japanese Yen. The USD/JPY pair traded as low as 105.04 and recently started an upside correction.

USD/JPY Technical Analysis US Dollar Japanese Yen

Looking at the 4-hours chart, the pair recovered above the 105.40 resistance, a connecting bearish trend line, and the 105.80 pivot level. Moreover, there was a break above the 23.6% Fib retracement level of the downward move from the 109.31 high to 105.04 low.

However, the pair faced a strong resistance near 106.80, 107.00, and the 100 simple moving average (red, 4-hours). More importantly, the 50% Fib retracement level of the downward move from the 109.31 high to 105.04 low is near the 107.20 level.

The 200 simple moving average (green, 4-hours) is also positioned near 107.40 to prevent further gains. Therefore, USD/JPY must climb above the 107.00 resistance and gain momentum above 107.20 to continue higher.

Conversely, if there is no upside break above 107.20, the pair is likely to restart its downward move. An immediate support is near the 106.00 level, below which the pair is likely to test the 105.40 support. Any further downsides could trigger a move towards the 105.04 swing low.

Fundamentally, the Manufacturing Purchasing Managers Index (PMI) for August 2019 (Prelim) was released by the Markit Economics. The market was looking for a minor increase from 50.4 to 50.5.

The actual result was disappointing, as there was a decline in the PMI to 49.9 (119-month low). Moreover, the US Services PMI declined from 53.0 to 50.9, well below the market forecast of 50.9.

The report added:

August data signalled a renewed slowdown in the rate of U.S. private sector business activity growth. The seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index dipped from 52.6 in July to 50.9 in August, to signal only a slight increase in business activity and the slowest pace of expansion for three months.

Overall, USD/JPY might struggle to continue higher above 107.20, while GBP/USD spiked higher in the past few sessions. Besides, EUR/USD is still trading in a bearish zone below the 1.1150 level.

Upcoming Economic Releases

  • US New Home Sales for July 2019 (MoM) – Forecast -0.2% versus +7.0% previous.
  • G7 Meeting.
  • Jackson Hole Economic Policy Symposium.

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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