USD/JPY Forecast: Trapped Within Sentiment

USD/JPY Current Price: 109.86

• Japanese trade deficit seen widening to  ¥1694.9B in January.
• US Treasury yields down amid coronavirus taking its toll on the economy.
• USD/JPY trapped within sentiment, dollar’s demand and dismal Japanese data.

The USD/JPY pair was confined to familiar levels for a third consecutive day, hovering just below the 110.00 mark. The pair started the day losing ground as risk aversion backed yen’s demand, although gains were curbed by persistent demand for the greenback and dismal Japanese data released earlier in the week, indicating economic contraction.  

The pair held ground despite collapsing equities and lower government debt yields. The yield on the benchmark 10-year US Treasury note,  was down to 1.54%, below the 3-month note yield which stood at 1.57%. During the upcoming Asian session, Japan will release January Trade Balance data. The total trade balance deficit is seen widening to ¥-1694.9B from ¥-154.6B, quite a discouraging number.

USD/JPY Short-Term Technical Outlook

The USD/JPY pair is holding on to its neutral stance in the short-term, seesawing around a directionless 20 SMA in its 4-hour chart. The 100 and 200 SMA are converging around 109.40, also unable lacking directional strength. Technical indicators, in the meantime, hover around their midlines but have turned flat after entering positive territory. The pair needs to leave the 109.40/110.30 range to gather some directional strength.

Support levels: 109.40 109.00 108.65

Resistance levels: 110.00 110.30 110.60

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