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Dollar Weakens As USD/JPY Nosedives And Gold Extends Rally

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Aayush Jindal

Key Highlights

  • USD/JPY declined sharply below the 104.20 support zone.
  • A crucial bearish trend line is forming with resistance near 105.10 on the 4-hours chart.
  • Gold price rallied above $1,920, EUR/USD and GBP/USD climbed higher sharply.
  • The US nonfarm payrolls could rise 600K in Oct 2020, less than the last 661K.

USD/JPY Technical Analysis

The US Dollar started a strong decline after it failed to clear the 105.40 resistance against the Japanese Yen. USD/JPY broke many supports near 104.50 and 104.20 to move into a bearish zone.

Looking at the 4-hours chart, the pair declined heavily after it settled below the 104.50 support, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

There was also a break below a connecting bullish trend line with support at 104.55 on the same chart. It even broke the 103.80 support, and traded below the 1.236 Fib extension level of the upward move from the 104.02 swing low (formed on 29th Oct, 2020) to 105.3 high.

If there are more losses, the pair could test the 103.20 support. It is close to the 1.618 Fib extension level of the upward move from the 104.02 swing low to 105.3 high.

On the upside, the recent breakdown support at 104.20 might act as a resistance. The next key resistance is forming near the 104.50 level. There is also a crucial bearish trend line forming with resistance near 105.10, which is close to the 200 SMA.

Overall, the US Dollar seems to be facing a strong selling interest amid 2020 US election results. Looking at gold price, there was a strong upward move above $1,900 and $1,920.

EUR/USD also gained traction and rallied above the 1.1800 resistance zone. Besides, GBP/USD remained stable above 1.2950 and recovered above 1.3020.

Upcoming Economic Releases

  • US nonfarm payrolls Oct 2020 – Forecast 600K, versus 661K previous.
  • US Unemployment Rate Oct 2020 - Forecast 7.7%, versus 7.9% previous.
  • Canada’s employment Change Oct 2020 – Forecast 100K, versus 378.2K previous.
  • Canada’s Unemployment Rate Oct 2020 - Forecast 8.8%, versus 9.0% previous.
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