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USD/JPY Trading Near Make-or-Break Levels

Aayush Jindal

Aayush Jindal

Key Highlights

  • USD/JPY declined below the 107.50 and 107.20 support levels.
  • A key bearish trend line is forming with resistance near 107.15 on the 4-hours chart.
  • The US Initial Jobless Claims for the week ending April 25, 2020 declined from 4442K to 3839K.
  • The US ISM Manufacturing Index could decline from 49.1 to 36.9 in April 2020.

USD/JPY Technical Analysis

In the past few days, the US Dollar remained in a bearish zone against the Japanese Yen. USD/JPY settled below the 108.00 pivot level to move into a bearish zone.

Looking at the 4-hours chart, the pair even broke the 107.50 support, the 200 simple moving average (green, 4-hours), and the 100 simple moving average (red, 4-hours).

Finally, there was a break below 107.00 and the pair traded to a new monthly low at 106.36. It is currently consolidating losses above the 106.80 level.

An initial resistance is near the 107.15 level or the 50% Fib retracement level of the recent decline from the 108.04 high to 106.36 low. There is also a key bearish trend line forming with resistance near 107.15.

The main resistance is near the 107.40 level since it is close to the 61.8% Fib retracement level of the recent decline from the 108.04 high to 106.36 low.

Any further gains could lead the pair towards the 107.50 resistance or the 100 simple moving average (red, 4-hours). Conversely, USD/JPY might fail to recover above 107.15 and 107.20.

On the downside, the 106.60 and 106.40 levels are decent supports, below which the bears are likely to aim a test of the 105.40 level in the near term.

Fundamentally, the US Initial Jobless Claims figure for the week ending April 25, 2020 was released by the US Department of Labor. The market was looking for a decline in claims from 4427K to 3500K.

The actual result was disappointing as the US Initial Jobless Claims came in at 3839K. Besides, the last reading was revised to 4442K.

The report added:

The 4-week moving average was 5,033,250, a decrease of 757,000 from the previous week's revised average. The previous week's average was revised up by 3,750 from 5,786,500 to 5,790,250.

Overall, USD/JPY is showing bearish signs, but it could start a strong recovery if it clears the 107.20 resistance. Looking at EUR/USD, the pair recovered above 1.0900, and GBP/USD climbed above 1.2500.

Upcoming Economic Releases

  • US Manufacturing PMI for April 2020 – Forecast 36.9, versus 36.9 previous.
  • US ISM Manufacturing Index for April 2020 – Forecast 36.9, versus 49.1 previous.