USD/JPY Forex Technical Analysis – Pressured as Recession Fears Increase Appeal of Safe-Haven Japanese Yen
The Dollar/Yen is edging lower early Monday in a quiet trade ahead of the U.S. Independence Day holiday. After hitting a multi-year high on June 29, momentum has been trending lower as concerns about prospects for the global economy are increasing the appeal of the safe-haven Japanese Yen.
Red-hot inflation and an urgency by central banks to drive interest rates higher and stem the flow of cheap money is fueling sell-offs across multiple financial markets, while lifting assets seen as safer bets.
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At 01:51 GMT, the USD/JPY is trading 134.974, down 0.266 or -0.20%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $69.24, up $0.27 or +0.38%.
Helping to fuel some of the selling pressure late last week were reports on U.S. consumer spending and manufacturing activity.
On Thursday, U.S. consumer spending rose less than expected in May. Though the report from the Commerce Department on Thursday suggested inflation had probably peaked, price pressures remained strong enough to keep the Fed on its aggressive monetary policy tightening path.
Additionally, the Institute for Supply Management released a report Friday showing its reading on U.S. manufacturing activity fell to its lowest level in two years in the month of June.
Short-Term Outlook
Trader reaction to 135.240 is likely to determine the direction of the USD/JPY early Monday.
Bearish Scenario
A sustained move under 135.240 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into a short-term 50% level at 134.249, followed by a minor bottom at 134.269.
A trade through 134.269 will change the minor trend to down. This will shift momentum to the downside. This could trigger a quick move into the short-term Fibonacci level at 133.599.
Buyers could come in on the first test of 133.599. If it fails, however, then look for the start of an acceleration to the downside with the next targets the intermediate 50% level at 131.683, followed by the main bottom at 131.495.
Bullish Scenario
A sustained move over 135.240 will signal the presence of buyers. This could lead to a test of the minor pivot at 135.877.
Aggressive counter-trend sellers could come in on the first test of 135.877. Overcoming this level, however, could trigger a retest of the main top at 137.003.