USD/JPY Forecast: Unstoppable Needs To Hold Above 111.00 To Continue To Post Higher Highs

USD/JPY Current Price: 111.43

• Japanese data, once again missed the market’s expectations, suggest steeper recession coming.
• A better perception of risk underpinned USD/JPY rally but was not enough to justify it.
• USD/JPY unstoppable needs to hold above 111.00 to continue to post higher highs.

The Japanese yen was the worst performer against the greenback, with the USD/JPY pair reaching 111.47, a level that was last seen in May 2019. There was no particular catalyst behind the run, but the combination of different circumstances that finally took their toll on the pair. The advance began with a better perception of risk, after China reported a decreasing number of cases outside Hubei, although the pair kept running once above the 110.00 level, despite other safe-haven assets holding on to their latest gains. But the strong divergences between the two countries’ data, for sure added to the bullish case.

Japan released overnight its January Merchandise Trade Balance, which resulted in ¥-1312.6B, better than the ¥-1694.9B expected although much worse than the previous ¥-154.6B. Imports were down by 3.6% while exports decreased by 3.5% in the same month.  Machinery Orders in December fell by 3.5%, much worse than the -1.3% forecast. Japanese macroeconomic figures keep worsening and suggesting the country is heading into a long recession. Nevertheless, it’s hard to justify the run after the market has ignored Japanese data for months. There are no relevant macroeconomic releases scheduled in the country this Thursday.

USD/JPY Short-Term Technical Outlook

The USD/JPY pair holds near the mentioned multi-month high and seems ready to extend to continue advancing during the upcoming sessions. In the 4-hour chart, the pair has run past all of its moving averages, which gain upward traction, while technical indicators are decelerating their advances in extreme overbought levels, anyway keeping the risk skewed to the upside. The pair could stabilize in the early hours of the Asian session, something needed ahead of a new leg north.

Support levels: 111.00 110.60 110.25

Resistance levels: 111.50 111.90 112.20