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USD/JPY Forecast: Poised To Extend Its Decline Once Below 110.20

USD/JPY Forecast: Poised To Extend Its Decline Once Below 110.20

USD/JPY Current Price: 110.63

  • Risk aversion amid spreading coronavirus backed the Japanese yen.
  • US indexes collapsed, Treasury yields fell to multi-year lows.
  • USD/JPY poised to extend its decline once below 110.20.

The USD/JPY pair lost roughly 100 pips this Monday on the back of risk-aversion. The market rushed away from high-yielding assets as the WHO warned that the coronavirus could become a pandemic after multiple cases were reported outside China. Wall Street collapsed, with the DJIA trading over 1,000 points lower ahead of the close, while Treasury yields plunged to multi-year lows, amid demand for safety. The yield on the benchmark 10-year Treasury note fell to 1.35%.

Japan celebrated a holiday this Monday and didn’t release macroeconomic data. This Tuesday, however, the country will publish the final version of the December Coincident Index, foreseen unchanged at 94.7, and the Leading Economic Index for the same month, seen steady at 91.6.  Given that Japanese markets were closed, there’s a good chance that the daily opening there will result in another run to safety and away from equities.

USD/JPY Short-Term Technical Outlook

The USD/JPY pair is bouncing from a daily low of 110.32, bearish, although struggling to recover above the 61.8% retracement of its latest bullish run, now the immediate resistance at 110.62. In the 4-hour chart, the pair edged sharply lower after breaking below its 20 SMA, which has lost bullish strength. Technical indicators fell straight from overbought to oversold levels, now hovering near these lasts. Further declines are to be expected on a break below 111.20, the immediate support, toward the 109.50 price zone.

Support levels: 110.20 109.80 109.45

Resistance levels: 111.00 111.40 111.75

View Live Chart for the USD/JPY

Image Sourced from Pixabay


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