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USD/JPY Tumbles, Recovery Remains Limited

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Technical analysis of Forex market

Key Highlights

  • The US Dollar declined more than 500 pips from the 111.40 high against the Japanese Yen.
  • There is a major bearish trend line formed with resistance at 109.60 on the 4-hours chart of USD/JPY.
  • The US ADP Employment Change in Dec 2018 increased 271K, more than the 178K forecast.
  • Today in the US, the nonfarm payrolls figure for Dec 2018 will be released, which is forecasted to rise from 155K to 177K.

USDJPY Technical Analysis

The US Dollar fell significantly from the 113.00 swing high against the Japanese Yen. The USD/JPY pair fell more than 800 pips and broke the 110.00 and 108.00 support levels.

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Looking at the 4-hours chart, the pair even broke the 106.00 support level and the 100 simple moving average (red, 4-hours). A new yearly low was formed at 104.64 before the pair started a solid upside correction.

It recovered above the 107.00 resistance and the 23.6% Fib retracement level of the recent decline from the 111.40 high to 104.64 low. On the upside, there are many hurdles for buyers near the 108.50 and 109.00 resistance levels.

Moreover, there is a major bearish trend line formed with resistance at 109.60 on the same chart. Besides, the 61.8% Fib retracement level of the recent decline from the 111.40 high to 104.64 low is also near the 108.80 level.

If there is a break above the 108.80 and 109.00 resistance levels, there could be an upside drift above the 110.00 resistance. On the downside, an initial support is near the 107.00 level, below which the pair may trade towards the 106.20 support level.

Besides, GBP/USD and EUR/USD is recovering nicely, but there are many barriers on the upside for buyers.

Economic Releases to Watch Today

  • Euro Zone CPI for Dec 2018 (YoY) (Prelim) – Forecast +1.8%, versus +1.9% previous.
  • Euro Zone Core CPI for Dec 2018 (YoY) (Prelim) – Forecast +1.0%, versus +1.0% previous.
  • US nonfarm payrolls Dec 2018 – Forecast 177K, versus 155K previous.
  • US Unemployment Rate Dec 2018 – Forecast 3.7%, versus 3.7% previous.
  • Canada’s Net Employment Change Dec 2018 – Forecast 5.0K, versus 94.1K previous.
  • Canada’s Unemployment Rate Dec 2018 – Forecast 5.7%, versus 5.6% previous.