USD/JPY Remains At Risk of More Losses Below 106.50

Key Highlights

  • USD/JPY declined sharply and traded to a new monthly low at 106.58.
  • A key bearish trend line is forming with resistance near 107.35 on the 4-hours chart.
  • The US Initial Jobless Claims in the week ending June 13, 2020 declined from 1566K to 1508K.
  • The UK Retail Sales could increase 5.7% in May 2020 (MoM), up from -18.1%.

 

USD/JPY Technical Analysis

This month, the US Dollar started a strong decline from the 110.00 resistance zone against the Japanese Yen. USD/JPY traded below the key 108.00 support to move into a bearish zone.

Looking at the 4-hours chart, the pair broke the 107.00 support and settled below the 100 simple moving average (red, 4-hours). A low was formed near 106.58 before the pair started an upside correction.

Recently, there was an upside correction above the 107.00 level. The pair climbed above the 23.6% Fib retracement level of the main decline from the 109.84 high to 106.58 low.

However, the pair struggled to clear the 107.60 resistance. There is also a key bearish trend line forming with resistance near 107.35 on the same chart. The main resistance on the upside is near the 108.00 level and the 100 SMA.

The next hurdle is near the 50% Fib retracement level of the main decline from the 109.84 high to 106.58 low. A successful close above 108.00 and 108.20 is needed for a strong upward move.

Conversely, the pair might continue to move down below the 106.50 and 106.20 support levels. Any further losses could lead it below the 106.00 level.

Fundamentally, the US Initial Jobless Claims figure in the week ending June 13, 2020 was released by the US Department of Labor. The market was looking for a sharp decline from 1542K to 1300K.

The actual result was disappointing, as the US Initial Jobless Claims only declined to 1508K. The last reading was also revised up from 1542K to 1566K.

The report added:

The 4-week moving average was 1,773,500, a decrease of 234,500 from the previous week's revised average. The previous week's average was revised up by 6,000 from 2,002,000 to 2,008,000.

Overall, USD/JPY remains at a risk of more losses unless it recovers above 107.35 and 108.00. Looking at EUR/USD and GBP/USD, both pairs are trimming gains and struggling to climb again.

Upcoming Economic Releases

  • UK Retail Sales for May 2020 (YoY) - Forecast -17.1%, versus -22.6% previous.
  • UK Retail Sales for May 2020 (MoM) - Forecast +5.7%, versus -18.1% previous.
  • Canadian Retail Sales April 2020 (MoM) – Forecast -15.1%, versus -10% previous.