Greenback Faces 38.2% Fibonacci Resistance Before Targeting 112.00

• With the US fourth-quarter GDP beating the market estimates the US Dollar was boosted, breaking the 50% Fibonacci resistance on the upside.
• The global tensions stemming from India-Pakistan military conflict in Kashmir receded, easing the market sentiment.
• Japan’s inflation rose slightly above estimates with little effect on the currency.

The USD/JPY is trading up 0.4% at around 111.85, the highest level in the last 10 weeks after the US macro data came out better than expected and helped the greenback to break above 50% Fibonacci resistance at 111.00 with US Dollar temporarily rejected at 112.00 earlier on Friday.

The US Dollar benefited from the set of positive macro data on Thursday with the US fourth-quarter GDP rising by 2.6% quarterly annualized rate, up from 2.2% expected and the Chicago Fed business activity index increased to 64.7 in February after falling to 56.7 in the previous month.

The publication of Japan’s inflation had a marginal effect on the currency pair as Japan’s headline inflation up 0.6% over the year in February while core inflation excluding fresh food and energy prices rose 0.7% y/y.

With the geopolitical tensions easing as Pakistan decided to release the imprisoned Indian pilot from downing the military airplanes incident on Wednesday, the risk-off market sentiment supporting Yen receded.

Technical studies on USD/JPY are elevated with the Relative Strength Index (RSI) and Momentum pointing higher and the Slow Stochastics moving back up into the overbought territory.  

The USD/JPY broke an important 50% Fibonacci resistance line at around 111.00 and rose as high as 111.98 on Friday. Currently, the USD/JPY struggles at 38.2% Fibonacci retracement of the move from 114.50 to 107.50.

The end of the week correction is likely to see the USD/JPY stabilize below 38.2% Fibonacci retracement at 111.85. Break above that level is likely to see USD/JPY targeting 112.00 and 112.60 next. 

USD/JPY daily chart