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USD/JPY trades in the 107.40 price zone, above the 23.6% retracement of its latest slump at 107.33, as financial markets have stabilized allowing the greenback to recover against the yen, FXStreet’s Chief Analyst Valeria Bednarik informs.

Key quotes

“Japan’s data reflected the extent of the economic downturn suffered within the ongoing pandemic, as the BSI Large Manufacturing Conditions Index came in at -52.3 in Q2 after printing at -17.2 in the previous quarter. Also, Industrial Production in the country fell by 9.8% in April and was down by 15% when compared to a year earlier. Capacity Utilization in the same month fell by 13.3%.”

“The USD/JPY pair is in corrective mode, after reaching extreme oversold conditions,  just above the 23.6% retracement of its latest slump at 107.33. The 38.2% retracement of the same decline comes at 107.80, a possible bullish target should the corrective advance continues.”

“In the 4-hour chart, technical indicators advance, although they remain below their midlines. The price is a few pips above a firmly bearish 20 SMA, but unable to advance beyond a now flat 200 SMA. A break below 107.30 would risk the chances of a steeper recovery, although it seems unlikely in the current scenario.”

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