USD/JPY Forecast: Heading towards 104.18 and lower

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USD/JPY Current price: 104.99

  • Yoshihide Suga has been confirmed by the Japanese Parliament as the new Prime Minister.
  • The BOE is having a monetary policy meeting, will likely remain on hold.
  • USD/JPY struggling around 105.00 and bearish, steeper decline expected.

The USD/JPY pair lost the 105.00 level, falling to a fresh monthly low of 104.79. The pair was already falling on the back of the broad dollar’s weakness, extending its slump after the release of dismal US Retail Sales figures. The US Federal Reserve had a limited impact on the pair, as it is heading into the Asian opening trading around the 105.00 level, finding some support during US trading hours in an uptick in Treasury yields. US equities, however, ended the day mixed, with only the DJIA able to retain early gains.

Meanwhile, Yoshihide Suga has been confirmed by the Japanese Parliament as the new Prime Minister of the country. He is expected to follow Abe’s path, and that should keep the waters calm, at least from that front.

The Bank of Japan is having a monetary policy meeting this Thursday, and it is largely anticipated to maintain its current monetary policy unchanged, with the main rate at -0.10% and the focus on keeping the yield-curve under control. Policymakers may revise their economic outlooks, but even with an upgrade of growth and inflation figures, the event has little chances of having a significant impact in the JPY.

USD/JPY short-term technical outlook

The USD/JPY pair is  still bearish and could extend its slump once below 104.70, now the immediate support. The 4-hour chart shows that it keeps trading well below a firmly bearish 20 SMA, which extends its decline below the larger ones. Technical indicators, in the meantime, have managed to post modest recoveries from daily lows, but remain within oversold levels, maintaining the risk skewed to the downside, poised to break below 104.18, July monthly low.

Support levels: 104.70 104.40 104.00

Resistance levels: 105.15 105.50 105.90  

View Live Chart for the USD/JPY