August 14, 2022
  • August 14, 2022

USD / JPY technical analysis: bearish performance continues

By on April 20, 2021 0
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The yen is a popular asset during times of turbulence.

USD / JPY hit a new low as it retreated to the support level of 107.97 today, the lowest for the currency pair in over a month and a half. Despite the appetite for risk, the weakness of the US dollar keeps the currency pair under pressure. The Japanese yen received some support from news of improving trade and industry sectors in the country, which saw improved numbers in February. But with the resurgence of COVID-19 cases in Japan, will the world’s third-largest economy fail to meet its economic forecasts?

According to the Ministry of Economy, Trade and Industry (METI), Japanese industrial production fell 1.3% in February, from 3.1% in January. But the reading exceeded the median estimate of -2.1%. Japanese industry saw a decline in cars, electrical machinery, transportation equipment and petroleum products. On an annualized basis, Japanese industrial production fell 2%, from 5.3% in January.

Capacity utilization stood at 93 in February, up from 95.7 the previous month. However, this is the fifth consecutive month that capacity utilization has exceeded 90 points.

On the trade front, the country’s trade surplus widened to $ 61.39 billion in March, beating market expectations. As a result, exports grew at an annual rate of 16.1%, reaching their highest level in three years, while imports jumped 5.7% to reach their highest level in 14 months. In the first quarter of 2021, Tokyo reversed its trade deficit since January.

The Bank of Japan (BoJ) has taken its toll on the growing popularity of central bank digital currencies (CBDCs) following the rise of the digital yuan. The BoJ recently announced that it has launched a CBDC experiment to learn the technical feasibility of the digital yen. Last fall, the Bank of Japan released a document outlining three stages of testing the digital yen. The main concern, according to Bank of Japan Governor Haruhiko Kuroda, is the ability to make cash transactions or offline payments in an emergency.

The COVID-19 public health crisis continues to weigh on Japan, as local reports confirm infections have reached their highest level in four months. New cases and the seven-day average have again exceeded 4,000, bringing the total number of cases in the country to 535,000. The death toll has exceeded 9,600 people.

Technical analysis of the pair:

On the daily chart, the USD / JPY is still in its descending channel range, and stability below the psychological support of 108.00 will support the bears. The pair would then be ready to test stronger support levels, the closest of which are currently 107.85, 107.00 and 106.65. Knowing that these levels will take technical indicators to high oversold levels, a retracement towards the correction is expected at any time. Despite recent performance, I would prefer to buy the currency pair from these mentioned levels. On the upside, the bulls will no longer control the overall trend without breaking through the psychological resistance at 110.00.

The currency pair does not anticipate any significant Japanese or US economic data, so risk sentiment will have the strongest impact on the pair’s trend.