USD/JPY Daily Forecast – Attempt To Settle Above The 50 EMA

USD/JPY Video 03.09.20.

U.S. Dollar Tries To Gain More Upside Momentum

USD/JPY made an attempt to settle above the 50 EMA at 106.30 as the U.S. dollar continued its rebound against a broad basket of currencies.

The U.S. Dollar Index has recently tried to get above the 20 EMA at 93 but did not manage to gain sufficient upside momentum. In case the U.S. Dollar Index manages to settle above the 20 EMA, USD/JPY will have good chances to get above the 50 EMA at 106.30.

Today, Japan reported Services PMI and Composite PMI data for August. Services PMI decreased from 45.4 in July to 45.0 in August, in line with analyst estimates. Meanwhile, Composite PMI managed to grow from 44.9 to 45.2.

The economic situation in Japan remains challenging, and traders focus on any potential shift in economic policy which may come with the new Prime Minister, who is scheduled to be chosen on September 14.

Interestingly, one of Bank of Japan board members, Goushi Kataoka, has recently stated that additional stimulus may be necessary to support the economy.

At this point, the markets are not pricing in an additional aggressive easing from Bank of Japan since other Bank of Japan board members are inclined to keep the current policy intact, but it’s certainly a story worth following.

Technical Analysis

USD/JPY managed to get above the 20 EMA at 106.00 and made an attempt to settle above the nearest resistance level at 50 EMA at 106.30.

In case USD/JPY settles above the 50 EMA, it will gain additional upside momentum and head towards the major resistance level at 107.00.

I maintain my view that USD/JPY will need very strong catalysts to get above 107.00 as many traders will be reluctant to open long positions above 107.00 because USD/JPY will face strong resistance in the 107.30 – 107.50 area.

On the support side, the previous resistance at the 20 EMA at 106.00 will likely serve as the first support level for USD/JPY. If USD/JPY manages to settle below this level, it will return back to the recent trading range between the support at 105.30 and the 20 EMA at 106.00.

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