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USD/JPY Starts Fresh Increase, Dollar Corrects Losses

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Aayush Jindal

Key Highlights

  • USD/JPY started a fresh increase from the 107.50 support zone.
  • It broke a major bearish trend line with resistance near 109.10 on the daily chart.
  • The US Initial Jobless Claims declined from 507K to 473K in the week ending May 8, 2021.
  • The US Retail Sales could increase 1% in April 2021 (MoM), down from +9.7%.

USD/JPY Technical Analysis

After a steady decline, the US Dollar found support near the 107.50 zone against the Japanese Yen. USD/JPY started a fresh increase above the 108.50 and 109.00 resistance levels.

Looking at the daily chart, the pair gained pace above the 109.00 level. It even cleared a major bearish trend line with resistance near 109.10 on the same chart. It is trading well above the 100-day simple moving average (red) and 200-day simple moving average (green).

There was a clear break above the 50% Fib retracement level of the downward move from the 110.96 high to 107.47 low.

The first major resistance on the upside is near the 110.15 level. It is close to the 76.4% Fib retracement level of the downward move from the 110.96 high to 107.47 low. A clear break above 110.15 could open the doors for a move towards the 111.00 region.

On the downside, an initial support is near the 109.20 level and the broken trend line. The next key support is near the 108.50 level, below which the pair could revisit the 107.50 support.

Overall, USD/JPY is likely to continue higher towards 111.00. Looking at EUR/USD and GBP/USD, there was a downside correction, but the bulls defended important supports near 1.2050 and 1.4000 respectively.

Economic Releases

  • US Retail Sales for April 2021 (MoM) – Forecast +1%, versus +9.7% previous.
  • US Industrial Production for April 2021 (MoM) – Forecast +1%, versus +1.4%% previous.
  • Michigan Consumer Sentiment Index for July 2021 – Forecast 90.4, versus 88.3 previous.
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