USD/JPY Struggling To Regain Ground Post Dovish Fed

Key Highlights

  • Recently, the Fed signaled possible interest rate cuts in 2019, putting pressure on the US Dollar.
  • USD/JPY settled below 108.50 and even broke the 108.00 support area.
  • The US Initial Jobless Claims for the week ending June 15, 2019 declined from 222K to 216K.
  • The US Manufacturing PMI in June 2019 (Preliminary) could slide from 50.5 to 50.4.

USDJPY Technical Analysis

In the past few days, the US Dollar traded in a range below 108.80 against the Japanese Yen. Recently, USD/JPY broke the key 108.50 and 108.20 supports and extended its decline below 108.00.

USDJPY Technical Analysis US Dollar Japanese Yen

Looking at the 4-hours chart, the pair clearly struggled to gain pace above the 108.80 level and the 100 simple moving average (red, 4-hours). The pair also remained well below the 109.00 pivot level and the 200 simple moving average (green, 4-hours).

More importantly, the Fed recently signaled possibilities of a rate cut due to uncertainties, resulting in a sharp decline in USD/JPY. The pair broke the 108.00 support and traded towards the 107.20 level.

It is currently struggling below 107.50 and is well below the 23.6% Fib retracement level of the drop from 108.72 to 107.12.

To start a decent recovery, the pair must break the 108.00 resistance plus the 50% Fib retracement level of the drop from 108.72 to 107.12. Moreover, there is a crucial bearish trend line forming with resistance at 108.20 on the same chart.

If there is a successful close above 108.00 and 108.25, the pair could start an upward move. If not, there are chances of more losses below 107.20 and 107.00.

Fundamentally, the US Initial Jobless Claims figure for the week ending June 15, 2019 was released by the US Department of Labor. The market was looking for a minor decline in claims from 222K to 220K.

The actual result was better than the market forecast, as the US Initial Jobless Claims declined from 222K to 216K. Besides, the Counting Jobless Claims were down from the last revised reading of 1.699M to 1.662M.

The report added:

The 4-week moving average was 218,750, an increase of 1,000 from the previous week’s unrevised average of 217,750.

Overall, the greenback seems to be under pressure after the Fed signaled a possible rate cut in 2019. Pairs such as EUR/USD, GBP/USD and AUD/USD climbed higher recently, whereas USD/JPY declined heavily.

Economic Releases to Watch Today

  • Germany’s Manufacturing PMI for June 2019 (Preliminary) – Forecast 44.5, versus 44.3 previous.
  • Germany’s Services PMI for June 2019 (Preliminary) – Forecast 55.4, versus 55.4 previous.
  • Euro Zone Manufacturing PMI June 2019 (Preliminary) – Forecast 48.0, versus 47.7 previous.
  • Euro Zone Services PMI for June 2019 (Preliminary) – Forecast 52.9, versus 52.9 previous.
  • US Manufacturing PMI for June 2019 (Preliminary) – Forecast 50.4, versus 50.5 previous.
  • US Services PMI for June 2019 (Preliminary) – Forecast 51.0, versus 50.9 previous.
  • US Existing Home Sales for May 2019 (MoM) – Forecast +1.2%, versus -0.4% previous.

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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