USD/JPY Daily Forecast – Resistance At 106.30 Stays Strong

USD/JPY Video 08.09.20.

U.S. Dollar Tries To Move Higher Against The Yen

USD/JPY is still stuck in a range between the 20 EMA at 106.10 and the 50 EMA at 106.30 as the U.S. dollar continues its attempts to gain more ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to develop more upside momentum above the 20 EMA at the 93 level but its gains are limited. In case the U.S. Dollar Index manages to settle above the nearest resistance at 93.20, USD/JPY will likely move above the 50 EMA at 106.30.

Today, Japan reported that its second-quarter GDP Growth Rate was -7.9% on a quarter-over-quarter basis. On an annualized basis, GDP declined by 28.1%.

It is increasingly likely that Japan will have to introduce more economic stimulus since the coronavirus pandemic continues to put significant pressure on consumer activity.

In July, Household Spending declined by 7.6% year-over-year. Analysts called for a decline of 3.7% so the reality turned out to be more grim than the analyst consensus.

Average Cash Earnings declined by 1.3% year-over-year, indicating that the decrease of Household Spending was mostly fueled by consumer anxiety over coronavirus and its impact on future employment rather than by an immediate hit to workers’ earnings.

While Japan’s economic data looks grim, it remains to be seen whether Bank of Japan is ready to provide more stimulus to the economy.

Technical Analysis

USD/JPY continues its attempts to get above the nearest resistance level at the 50 EMA at 106.30. In case USD/JPY manages to settle above this level, it will gain additional upside momentum and may quickly test the next important resistance level at 107.00.

I maintain my opinion that USD/JPY will need significant catalysts to get above the resistance at 107.00. At minimum, the U.S. Dollar Index should firmly return to the upside trend.

On the support side, the nearest support level for USD/JPY is still located at the 20 EMA at 106.10.

If USD/JPY moves below the 20 EMA, it will gain more downside momentum and head towards the test of the next significant resistance level at 105.30. There are no material levels between the support at 105.30 and the 20 EMA so this move may be fast.

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