US Dollar, Euro, Australian Dollar vs Japanese Yen – Price Action:
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How to trade USD/JPY
The Japanese yen is likely to remain firm against the US dollar and some currencies amid fears of a global economic slowdown following a series of overwhelming macro data.
The G10 economic surprise index has plunged since the end of March to its lowest level since early February, raising the risk that months of positive data may have come full circle. As for the US, data since the end of last month (from last week’s GDP consumer spending to Wednesday’s change in his ADP employment and his ISM service) show the economy is losing momentum as the impact of the Fed’s rate hike spills over. causing concern.
USD/JPY daily chart
Chart created by Manish Jaradi using TradingView
The recent underwhelming US data means some optimism about economic growth prospects may be reassessed. Until the end of last month, the consensus forecast implied a quarter of negative economic growth in the US (i.e. no technical recession). Markets are now pricing in a more than 60% chance that US interest rates will be cut after his July meeting.
USD/JPY – soft bias
As highlighted in the last update, USD/JPY continues its downtrend (see color-coded chart). February’s rally was corrective, losing momentum around the 200-day moving average (DMA). This was reconfirmed by the 14-week Relative Strength Index (RSI), which was capped at 53 after the rebound, with correction rallies tending to stall around the 50-55 level of the RSI.
USD/JPY weekly chart
Charts created using TradingView
However, USD/JPY has very strong converging support at the January low of 127.20, which coincides with the lower end of the Ichimoku cloud on the weekly chart and the May 2022 low of 126.35. So while the USD/JPY bias looks weak, the downside may be limited for now. For USD/JPY to decisively fall below the 126.35-127.20 support area, it will need a strong catalyst, such as a surge in risk aversion and global weakness in the USD. On the upside, last week’s high of 133.75 marked the first resistance. A stronger barrier is at 200-DMA (currently around 137.25).
AUD/JPY weekly chart
Chart created by Manish Jaradi using TradingView
AUD/JPY – looks vulnerable
The May 2022 horizontal trendline (around 87.40) is slightly above another early 2021 horizontal trendline (around 85.70). A decisive break below could pave the way for the 200-week moving average (currently at 81.60).
EUR/JPY weekly chart
Chart created by Manish Jaradi using TradingView
EUR/JPY – range with downward bias
The directional index on the weekly chart suggests that the prevailing (up) trend situation since 2020 is running its course for now. EUR/JPY remains stuck in the recently formed 137-146 range, which could skew towards the lower end of the range in the short term. Strong support is at 89-WMA, which coincides with the lower end of the Ichimoku cloud (around 135.00) on the weekly chart.
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— Written by DailyFX.com Strategist Manish Jaradi.
— Contact and follow Jaradi on Twitter: @JaradiManish