Technical Bias: Neutral
Key Takeaways
• US dollar after trading as high as 104.25 against the Japanese yen is likely to correct lower in the short term.
• A move towards the 103.20 support area is possible.
• USDJPY support seen at 103.50 and resistance ahead at 103.95.
The US dollar fell close to the 103.50 level against the Japanese yen recently after the safe havens got bid across the board. More losses are favored in the USDJPY pair if sellers take control.
Japanese Industrial Production and Retail Sales
There were a couple of important releases lined up during the Asian session in the Japan, including the Japanese industrial production data, retail sales figure and the unemployment rate. The outcome was mixed, as the Japanese retail sales jumped by 0.5%, beating the expectation of 0.1%. The Japanese industrial production registered a gain of 0.2%, which was 0.8% lower than the market expectation. Moreover, the Japanese unemployment rate increased by 0.1% from 3.7% to 3.8%. Overall, the outcome was on the disappointing side, and could weigh on the yen buyers in the short term.
Technical Analysis
The USDJPY pair was seen climbing higher after the disappointing data during the Asian session. There is a flag pattern forming on the 4 hour timeframe for the pair. The pair is currently heading towards the flag resistance area. If the US dollar buyers fail to push the pair above the resistance area, then a move lower towards the flag support zone is possible in the short term. In that situation, if the support is broken, then a move towards the 50.0% Fibonacci retracement level of the last leg higher from the 102.13 low to 104.25 high is possible.
However, for the mentioned scenario to happen, the pair needs to break the 50 simple moving average (SMA) -4H.
Overall, one might consider selling with a break as chasing strength in the US dollar does not look like a good option in the near term.
