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USD/JPY Recovery Could Face Hurdles Near 105.00

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Technical analysis of Forex market

Key Highlights

  • USD/JPY traded as low as 104.24 before correcting higher.
  • It is facing a strong resistance near 105.00 and 105.40.
  • EUR/USD and GBP/USD corrected lower from 1.1880 and 1.3175 respectively.
  • The US Manufacturing PMI could increase from 53.2 to 53.4 in Oct 2020 (Preliminary).

USD/JPY Technical Analysis

The US Dollar failed to continue higher above 105.75 and started a fresh decline against the Japanese Yen. USD/JPY broke the key 105.00 support zone to move into a bearish zone.

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Looking at the 4-hours chart, the pair settled well below the 105.00 support zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

It traded as low as 104.24 before starting an upside correction. There was a break above the 104.60 level, plus the 23.6% Fib retracement level of the recent decline from the 105.75 high to 104.24 swing low.

However, the pair is facing a strong resistance near the 105.00 zone. The 50% Fib retracement level of the recent decline from the 105.75 high to 104.24 swing low is also near the 105.05 level.

The next major resistance is near the 105.40 level since it is close to the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours). A clear break above 105.00 and then a follow up move above 105.40 is needed for a fresh increase.

If not, there is a risk of more losses below 104.20 and 104.00 in the near term. The next major support below 104.00 could be near 103.50.

Looking at EUR/USD and GBP/USD, there was a sharp downside correction from the 1.1880 and 1.3175 resistance levels (respectively), but dips are likely to remain limited.

Upcoming Economic Releases

  • UK Retail Sales for Sep 2020 (YoY) – Forecast +3.7%, versus +2.8% previous.
  • UK Retail Sales for Sep 2020 (MoM) – Forecast +0.4%, versus +0.8% previous.
  • Germany’s Manufacturing PMI for Oct 2020 (Preliminary) – Forecast 55.1, versus 56.4 previous.
  • Germany’s Services PMI for Oct 2020 (Preliminary) – Forecast 49.2, versus 50.6 previous.
  • Euro Zone Manufacturing PMI for Oct 2020 (Preliminary) – Forecast 53.1, versus 53.7 previous.
  • Euro Zone Services PMI for Oct 2020 (Preliminary) – Forecast 47.0, versus 48.0 previous.
  • UK Manufacturing PMI for Oct 2020 (Preliminary) – Forecast 53.1, versus 54.1 previous.
  • UK Services PMI for Oct 2020 (Preliminary) – Forecast 54.0, versus 56.1 previous.
  • US Manufacturing PMI for Oct 2020 (Preliminary) – Forecast 53.4, versus 53.2 previous.
  • US Services PMI for Oct 2020 (Preliminary) – Forecast 54.6, versus 54.6 previous.