According to UOB Group’s FX Tacticians, the USD/JPY is anticipated to find support in the mid-112.00s in the coming weeks as the currency pair continues to fall further.
Observation Over a 24-hour Period
Experts noted yesterday that the USD could continue to decline, but that a tear of the significant support level of 112.50 is unlikely. Additionally, they stated that there is slight support at 112.65.
Following that, the USD fell to 112.64 before regaining its footing. Traction indicators have shifted to a neutral state, and the USD is expected to start trading sideways for the rest of the day, with a target range of 112.80–113.40.
Within the next 1-3 weeks, there isn’t much more to say about Wednesday’s update than that (01 Dec, spot at 113.40).
According to experts, the US Dollar could decrease even further, but the level of $112.50 is anticipated to provide solid support. An upside breach of the significant resistance level at 113.80 (which was at 114.00 yesterday) would imply that the USD is not prepared to move below 112.50.
As for the immediate future, a clear breach of 112.50 would redirect attention to 112.00.
Insights On The Technical Front
USD/JPY CHART Source: Tradingview.com
Going into the North American session, the USD/JPY pair regained its bid tone and was last seen moving just a few basis points underneath the daily high, in the area of 113.35-40.
On Friday, the pair managed to gain some positive momentum for the second day in a row, building on the overnight recovery from the immediate area of the mid-112.00s, which was the pair’s lowest point since October 11.
Review Of The Fundamentals
A largely positive tone in the stock markets weighed on the relatively secure Japanese Yen, which was seen as a major factor in the strengthening of the US Dollar against the Japanese Yen.
As a result of waning concerns about the possible economic ramifications of the newly found, potentially vaccine-resistant Omicron version of the coronavirus, the overall risk viewpoint has stabilized a little.
In addition to this, the passing of a bill to fund the United States government through the middle of February contributed to the positive mood in the markets on Friday.
Meanwhile, the US Dollar strengthened as expectations grew that the Federal Reserve would adopt a more aggressive policy response to contain the stubbornly high inflation that has grown stronger in recent weeks.
For the time being, US Treasury bond yields are falling, which is discouraging USD bulls from making aggressive bets and keeping the lid on further profits for the USD/JPY duo.
Also, hesitant speculators recommended waiting for a new catalyst to emerge from Friday’s official launch of the closely watched US monthly employment data, which is scheduled to be released on Friday.
The widely anticipated Nonfarm Payrolls (NFP) report will have a significant impact on USD price movements. In addition to this, the ISM Services PMI for the United States will be closely scrutinized for any potentially profitable trading activity in the USD/JPY pair.