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USD/JPY Breaks Key Support, EUR/USD & GBP/USD Rally

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Technical analysis of Forex market

Key Highlights

  • USD/JPY failed to clear a crucial resistance zone near 107.40 and 107.50.
  • It declined and broke a major support near 106.70.
  • The US Initial Jobless Claims in the week ending July 18, 2020 increased from 1,307K to 1,416K.
  • The US Manufacturing PMI could improve from 49.8 to 51.5 in July 2020 (Preliminary).

USD/JPY Technical Analysis

In the past few days, the US Dollar tested the 106.65 support zone on multiple occasions against the Japanese Yen. USD/JPY recently corrected higher, but it failed to surpass 107.40 and declined below 106.65.

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Looking at the 4-hours chart, the pair recovered above the 106.80 and 107.00 resistance levels earlier this week. The pair even broke the 50% Fib retracement level of the key decline from the 107.54 high to 106.68 swing low.

However, the pair failed to clear a crucial resistance near the 107.40 and 107.50 levels. There is a confluence zone forming near 107.40, a connecting bearish trend line, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

The pair failed to surpass 107.40 and started a strong decline in the past two sessions. It broke a major support near the 106.70 and 106.65 levels to enter a bearish zone. It seems like the pair might continue lower towards 106.20.

Conversely, a successful close above the 107.40 and 107.50 resistance levels could open the doors for more gains. In the mentioned case, the pair could revisit the 108.00 level.

Fundamentally, the US Initial Jobless Claims figure in the week ending July 18, 2020 was released by the US Department of Labor. The market was looking for no change from the last reading of 1,300K.

The actual result was disappointing, as the US Initial Jobless Claims increased to 1,416K. The last reading was also revised up from 1,300K to 1,307K.

Overall, USD/JPY is trading in a bearish zone and it might continue lower towards 106.20. Looking at EUR/USD and GBP/USD, both pairs are trading in a positive zone and rallied recently. Moreover, gold price extended its rise above the $1,890 level.

Upcoming Economic Releases

  • Germany’s Manufacturing PMI for July 2020 (Preliminary) – Forecast 48.0, versus 45.2 previous.
  • Germany’s Services PMI for July 2020 (Preliminary) – Forecast 50.5, versus 47.3 previous.
  • Euro Zone Manufacturing PMI July 2020 (Preliminary) – Forecast 50.0, versus 47.4 previous.
  • Euro Zone Services PMI for July 2020 (Preliminary) – Forecast 51.0, versus 48.3 previous.
  • UK Manufacturing PMI for July 2020 (Preliminary) – Forecast 52.0, versus 50.1 previous.
  • UK Services PMI for July 2020 (Preliminary) – Forecast 51.5, versus 47.1 previous.
  • US Manufacturing PMI for July 2020 (Preliminary) – Forecast 51.5, versus 49.8 previous.
  • US Services PMI for July 2020 (Preliminary) – Forecast 51.0, versus 47.9 previous.