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USD/JPY Daily Forecast – Yen Gains More Ground

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USD/JPY Video 18.08.20.

U.S. Dollar Remains Under Pressure

USD/JPY is currently trying to settle below 105.50 as the U.S. dollar continues to lose ground against a broad basket of currencies.

The U.S. Dollar Index continues its attempts to settle below the recent lows at 92.50. A move below this level will likely lead to increased downside momentum for the U.S. Dollar Index, putting additional pressure on USD/JPY.

The recent trading sessions have been hard for USD/JPY bulls since USD/JPY quickly gained downside momentum after it managed to settle below the 50 EMA at 106.60.

At this point, it looks like the main driver for the recent move was the decline in U.S. government bond yields which made the U.S. dollar less attractive.

Just a few days ago, U.S. 10-year government bonds yielded almost 0.73%. Currently, the 10-year government bond yield has declined below 0.67%, putting additional pressure on the American currency.

In case the negative trend in U.S. government bond yields persists, USD/JPY may head towards the lows reached at the end of July.

The nearest market-moving report for USD/JPY is scheduled to be released on Wednesday when the U.S. will provide FOMC Minutes from the latest Fed meeting. Traders will definitely search for clues on the Fed’s policy for the upcoming months.

Technical Analysis

USD/JPY managed to get below 106.00 and quickly gained downside momentum which pushed it towards 105.50.

The nearest support level for USD/JPY is located at 105.30. This level has been tested several times at the beginning of August, and there is a decent chance that USD/JPY will face some support near 105.30 after a material sell-off.

In case USD/JPY gets below 105.30, it will continue its current downside move and head towards the next support at 104.70. I’d note that RSI is in the moderate territory so there is plenty of room to gain downside momentum.

On the upside, the previous support level at 106.00 will likely serve as the first material resistance for USD/JPY.

If USD/JPY manages to get above 106.00, it will head towards the next resistance level at the 20 EMA at 106.20.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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