USD/JPY Could Struggle Despite Sharp Rise In US GDP

Key Highlights

  • USD/JPY traded below many important supports such as 105.00 and 104.50.
  • A crucial bearish trend line is forming with resistance near 105.20 on the 4-hours chart.
  • The US GDP expanded 33.1% in Q3 2020 (Prelim) after a sharp COVID-19 plunge.
  • The Euro Zone GDP is likely to grow 9.4% in Q3 2020 (QoQ) (Prelim).

 

USD/JPY Technical Analysis

The US Dollar started a strong decline from well above 105.80 and traded below many important support near 105.00 against the Japanese Yen. USD/JPY might attempt an upside correction, but it is likely to face sellers near 104.50 and 105.00.

Looking at the 4-hours chart, the pair followed a bearish pattern from well above 105.80. It broke many bearish continuation patterns and extended its decline below 104.50.

The pair also settled well below the 105.00 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). There is also a crucial bearish trend line forming with resistance near 105.20.

The recent low was formed near 104.03 before the pair started an upside correction. On the upside, an initial resistance is near the 104.50 level. The main resistance is near the 105.00 level (the last key breakdown zone).

If there is no upside break above 104.50 and 105.00, the pair is likely to resume its decline. On the downside, an initial support is near the 104.00 level, below which USD/JPY could decline towards the 103.20 support.

Fundamentally, the US Gross Domestic Product report for Q3 2020 (Prelim) was released yesterday by the US Bureau of Economic Analysis. The market was looking for a sharp rise of 31% in the GDP.

The actual result was above the market forecast, as the US Gross Domestic Product expanded at a record pace of 33.1% in Q3 2020.

The report added that:

The increase in third quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19.

Looking at EUR/USD, the pair extended its decline below the 1.1750 and 1.1720 support levels. Similarly, there were bearish moves in GBP/USD, gold price, and crude oil price.

Upcoming Economic Releases

  • German GDP for Q3 2020 (QoQ) (Preliminary) – Forecast +7.3%, versus -9.7% previous.
  • Euro Zone GDP Q3 2020 (QoQ) (Preliminary) - Forecast +9.4%, versus -11.8% previous.
  • US Personal Income for Sep 2020 (MoM) - Forecast +0.4%, versus -2.7% previous.