- USD / JPY is down for the fifth day in a row, losing more than 0.05%.
- An upbeat market sentiment weighed on the dollar as the DXY dips below 96.00.
- Crucial USD / JPY support will be found at the November 9 low at 112.72.
The USD/JPY it plummets for the fifth day in a row, down 0.10%, trading at 112.84 during the American session at the time of writing. Market sentiment is bullish after a volatile session on Tuesday, targeting the COVID-19 variant of Ómicron and aggressive comments from Federal Reserve Chairman Jerome Powell, hurting investors’ spirits.
During the night session, USD / JPY peaked around 113.66, 20 pips above the 50 hourly simple moving average (SMA) but, in the last few hours, when Wall Street opened, USD / JPY has fallen by below 113.00, despite the upward movement of the 10-year US Treasury yield, rising to 4bp, standing at 1.48%.
Meanwhile, the US dollar index, which tracks the value of the dollar against six rivals, is down 0.19% to 95.81, down from the 96.00 figure recovered on Tuesday, as the market confidence declined.
On Tuesday, aggressive comments from Jerome Powell, who noted that inflation is no longer “transitory” and favors a faster reduction in bonds, spurred volatility in the markets. Short-term US bond yields rose as the curve flattened further since March last year. In addition, on Wednesday at 15:00 GMT, Powell will testify before the House of Representatives, ending his appearance in Congress. Any meaningful word you say will be scrutinized by investors.
According to the ADP Research Institute, prior to the opening of Wall Street, the change in US ADP employment in November showed that private payrolls rose by 534,000 more than the 525,000 predicted by analysts. According to Nela Richardson, ADP’s chief economist, “The recovery in the labor market continued to drive its challenges last month.” In addition, he added that “service providers, who are most vulnerable to the pandemic, have dominated labor earnings this year. It is too early to tell if the Omicron variant could slow down job recovery in the coming months. “
That said, the attention of USD / JPY traders is on the Fed’s Jerome Powell statements in Congress and on Friday’s non-farm payroll report.
USD / JPY Price Forecast: Technical Outlook
The USD / JPY daily chart shows that the pair has a short-term bearish bias, although on Tuesday, despite breaking the 50-day moving average (DMA) to the downside, it bounced off the November 9 low at 112.72 and recovered 113.00. Also, on November 10, a 130 pip bullish move, which formed a large bullish engulfing candlestick pattern, boosts sentiment for USD bulls and reinforces that 112.72 would be a troublesome support to overcome for USD bears.
Additionally, the upward sloping 100 and 200 DMA, which reside below the spot price, support the bullish bias, which coupled with the current USD / JPY fundamentals with the Fed looking for a faster drawdown would limit any movement to the come down.
However, in the result of moving lower, the first support would be the November 9 low at 1112.72. Failure of the latter would expose the September 30 low at 112.07, previous resistance turned support, followed by the 100 DMA at 111.56.
On the other hand, the 50 DMA at 113.30 would be the first resistance. A breakout of the former would expose the November 10 high at 114.00, followed by the October 20 cycle high at 114.70.
Technical levels
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