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USD/JPY Forecast: Bearish Heading Into The Asian Opening

Valeria Bednarik - Chief Analyst at FXStreet

USD/JPY Current Price: 108.98

  • The Japanese yen trades with a firmer tone amid prevalent fears of a virus outbreak.
  • US Treasury yields fell to their lowest since last October amid risk-off.
  • USD/JPY bearish heading into the Asian opening, 108.65 critical Fibonacci support.

The USD/JPY pair has settled at around 109.00, after trading as low as 108.72 at the beginning of the day. The Japanese currency appreciated on the back of risk aversion, triggered by news coming from China indicating that the coronavirus is getting stronger and could continue spreading. The pair recovered from the mentioned low amid the broad dollar’s demand, but risk-off sentiment maintained in the red for the day.

US Treasury yields, in the meantime, fell to their lowest since last October, with the yield on the benchmark 10-year note hitting 1.60%. Japan’s macroeconomic calendar has little to offer these days. The country didn’t release relevant data on Monday but will publish the December Corporate Service Price Index, seen unchanged at 2.1% YoY in December.

USD/JPY Short-Term Technical Outlook

The USD/JPY pair has managed to end the day just above the 50% retracement of its January rally, measured between 107.64 and 110.28. Nevertheless, the risk remains skewed to the downside according to the 4-hour chart, as it remains below all of its moving averages, with the 20 SMA crossing below the larger ones. Technical indicators, in the meantime, have recovered from their lows within extreme oversold levels, but quickly lost strength and turned flat well below their midlines. The main support now is 108.65, the 61.8% retracement of the mentioned rally, with a break below it exposing the low of the range at 107.64.

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