USD/JPY Daily Forecast – U.S. Dollar Remains Under Pressure

USD/JPY Video 21.08.20.

Yen Gains Ground Despite Weak PMI Data

USD/JPY declined towards 105.50 as the U.S. dollar found itself under pressure after the release of weak U.S. employment data.

Yesterday, the U.S. Dollar Index tried to settle above 93 but failed to gain enough upside momentum and declined towards 92.50. Currently, the U.S. Dollar Index is trying to get to the test of the 93 level again. In case the U.S. Dollar Index manages to settle above 93, USD/JPY will get more support.

Today, Japan provided its inflation data for July and Flash PMI data for August.

Inflation Rate increased by 0.2% on a month-over-month basis and gained 0.3% on a year-over-year basis. Core Inflation Rate was 0.0% year-over-year.

Meanwhile, Manufacturing PMI  increased from 45.2 in July to 46.6 in August while Services PMI decreased from 45.4 to 45.0. Numbers below 50 show contraction.

The continued weakness in the services sector is not surprising given the negative impact of coronavirus-related uncertainty. Japan’s PMI data for August has once again highlighted the challenging state of the country’s economy.

Technical Analysis

USD/JPY did not manage to settle above the nearest resistance level at the 20 EMA at 106.05 and declined closer to 105.50. Currently, USD/JPY is stuck in a range between the support at 105.30 and the resistance at the 20 EMA.

RSI is in the moderate territory so there is plenty of room to gain more momentum in case the right catalysts emerge.

On the support side, a move below the nearest support level at 105.30 will provide a chance to get to the test of the next support level at 104.70. In case USD/JPY is able to settle below 104.70, it will gain additional downside momentum and head towards the lows reached in late July at 104.20.

On the upside, the 20 EMA remains the first major obstacle on the way up. In case USD/JPY manages to settle above the 20 EMA, it will gain more upside momentum and head towards the 50 EMA level at 106.45. A move above the 50 EMA will allow USD/JPY to get to the test of the next resistance level at 107.00.

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