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USD/JPY Facing Many Hurdles On Daily Chart Near 108.40

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Technical analysis of Forex market

Key Highlights

  • USD/JPY started an upside correction above the 107.00 resistance.
  • A crucial resistance is forming near 108.00 and 108.40 on the daily chart.
  • EUR/USD outperformed and broke the 1.0950 resistance zone.
  • The US Initial Jobless Claims in the week ending May 16, 2020 declined from 2687K to 2438K.

USD/JPY Technical Analysis

Earlier this month, the US Dollar traded to a new two-month low at 105.98 against the Japanese Yen. USD/JPY started an upside correction above 107.00, but it is facing a lot of hurdles on the upside.

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Looking at the daily chart, the pair was able to clear a connecting bearish trend line at 107.35. It opened the doors for more gains and the pair surpassed the 107.50 resistance.

Besides, there was a break above the 23.6% Fib retracement level of the key decline from the 111.71 high (formed in March 2020) to 105.98 low. However, there are many hurdles on the upside near 108.00 and 108.40.

More importantly, there is a confluence barrier forming near the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours) at 108.40.

The next key resistance is near the 50% Fib retracement level of the key decline from the 111.71 high (formed in March 2020) to 105.98 low at 108.85. Any further gains could lead the pair towards the 109.50 level and another connecting bearish trend line on the same chart.

Conversely, USD/JPY might fail to continue higher and it could resume its decline. The first key support is near the 107.000 zone, below which the pair is likely to revisit 106.00 or 105.50.

Fundamentally, the US Initial Jobless Claims figure for the week ending May 16, 2020 was released by the released by the US Department of Labor. The market was looking for a decline in claims from 2981K to 2400K.

The result was mostly better than the forecast, as the US Initial Jobless claims declined to 2438K. Besides, the last reading was revised down from 2981K to 2687K.

The report added:

The 4-week moving average was 3,042,000, a decrease of 501,000 from the previous week’s revised average. The previous week’s average was revised down by 73,500 from 3,616,500 to 3,543,000.

Overall, USD/JPY is facing an uphill task near the 108.00 and 108.40 levels. Looking at EUR/USD, the pair popped higher and broke many resistances such as 1.0920, 1.0950 and 1.1000.

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