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USD/JPY Recovery Could Fail Near 107.00

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Aayush Jindal

Key Highlights

  • USD/JPY traded to a new monthly low at 105.98 before correcting higher.
  • A crucial bearish trend line is forming with resistance near 106.90 on the 4-hours chart.
  • The US Initial Jobless Claims for the week ending May 02, 2020 improved from 3846K to 3169K.
  • The US nonfarm payrolls are likely to decline 22000K in April 2020.

USD/JPY Technical Analysis

In the past few days, the US Dollar declined heavily below 110.00 and 108.00 against the Japanese Yen. USD/JPY even settled below the 107.50 support zone to enter a bearish zone.

Looking at the 4-hours chart, the pair traded to a new monthly low at 105.98 and settled well below both the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

Recently, there was an upside correction from the 105.98 low and the pair recovered above the 38.2% Fib retracement level of the downward move from the 107.49 high to 105.98 low.

However, there is a strong resistance waiting on the upside near the 106.90 and 107.00 levels. There is also a crucial bearish trend line forming with resistance near 106.90. It is close to the 61.8% Fib retracement level of the downward move from the 107.49 high to 105.98 low.

The main resistance is now near the 107.20 level and the 100 simple moving average (red, 4-hours). A successful close above the trend line and the 107.20 level is needed for a strong recovery in the near term.

Conversely, USD/JPY might fail near 107.00 or 107.20 and it could extend its decline below 106.00 in the coming days.

Fundamentally, the US Initial Jobless Claims figure for the week ending May 02, 2020 was released by the US Department of Labor. The market was looking for a decline from 3839K to 3000K.

The actual result was slightly lower than the forecast as the US Initial Jobless Claims declined to 3169K. Besides, the last reading was revised to 3846K

The report added:

The 4-week moving average was 4,173,500, a decrease of 861,500 from the previous week's revised average. The previous week's average was revised up by 1,750 from 5,033,250 to 5,035,000.

Overall, USD/JPY is approaching a few key hurdles near 107.00 and it might struggle to continue higher. Looking at EUR/USD and GBP/USD, both pairs started an upside correction.

Upcoming Economic Releases

  • US nonfarm payrolls April 2020 – Forecast -22000K, versus -701K previous.
  • US Unemployment Rate April 2020 - Forecast 11.2%, versus 8.7% previous.
  • Canada’s employment Change payrolls April 2020 – Forecast -4000K, versus -1010.7K previous.
  • Canada’s Unemployment Rate April 2020 - Forecast 18%, versus 7.8% previous.
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