USD/JPY Daily Forecast – Attempt To Settle Above 105.00

Japan’s Economy Remains Under Serious Pressure

USD/JPY is trying to continue its rebound as the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to get above the 94 level and tries to continue its upside move. If the U.S. Dollar Index moves higher, USD/JPY will have a good chance to settle above 105.00.

Today, Japan provided flash readings of Manufacturing PMI and Services PMI for September. Manufacturing PMI increased from 47.2 in August to 47.3 in September while Services PMI grew from 45.0 to 45.6. Numbers below 50 show contraction.

PMI reports indicated that Japan’s economy remained under significant pressure due to the consequences of the coronavirus pandemic.

Meanwhile, Bank of Japan Governor Haruhiko Kurodo stated that he did not discuss the recent strength of the yen with the new Prime Minister Yoshihide Suga and added that currency rates should reflect fundamentals.

It remains to be seen whether Bank of Japan will find additional ways to support the economy as its options are limited. Most likely, USD/JPY will remain in the hands of general market sentiment, although continued weakness of Japan’s economic reports may ultimately push yen to lower levels.

Technical Analysis

USD/JPY has managed to get above the resistance at 104.90 and is trying to settle above 105.00. If this attempt is successful, USD/JPY will head towards the next resistance level at 105.30.

The 20 EMA is located at 105.40 so USD/JPY is set to face strong resistance in the 105.30 – 105.40 area. In case USD/JPY manages to settle above this resistance area, it will gain more upside momentum and head towards the next resistance at the 50 EMA at 105.85.

On the support side, the previous resistance at 104.90 will likely serve as the first support level for USD/JPY. A move below this level will open the way to the test of the material support level at 104.70.

If USD/JPY gets below the support at 104.70, it will move towards the next support level at 104.20.

At this point, USD/JPY is repeating action seen in late July when an unsuccessful test of the support at 104.20 led to a quick rebound. If USD/JPY manages to stay above 105.00, it will have a good chance to continue its current rebound. #USD/JPY##FX#

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