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Japan’s economic contraction hit an annualized record low of -27.8% while the USD/JPY is down at the beginning of the week as the mood is somehow depressed, which helps the yen. The pair is pressuring a Fibonacci support level and at risk of falling further, FXStreet’s Chief Analyst Valeria Bednarik briefs.

Key quotes

“Japan reported Q2 GDP, which came in at -7.8% for the three months to June, down at an annualized pace of 27.8%, worse than anticipated. The country also reported June Industrial Production which fell 18.2% YoY, and Capacity Utilization, which was up 1.9% in the month. The US will have a light start to the week as it will publish a minor report, the August NAHB Housing Market Index, foreseen at 73 from 72 in the previous month.”

“USD/JPY is trading at daily lows and piercing the 23.6% retracement of its latest bullish run. The short-term picture is bearish as the pair has extended its decline below its 20 SMA, which now gains bearish strength.” 

“Technical indicators, in the meantime, accelerate their declines within negative levels, in line with a downward extension on a break below 106.20, the immediate support.”