Key Highlights
- The US Dollar settled above the key 107.80 and 108.00 resistances against the Japanese Yen.
- USD/JPY is correcting gains, but it remains well supported near 108.00.
- EUR/USD and GBP/USD are showing positive signs above 1.1075 and 1.2800 respectively.
- The US Manufacturing PMI increased from 51.1 to 51.5 in Oct 2019 (Preliminary).
USD/JPY Technical Analysis
This month, the US Dollar gained bullish momentum above the 107.50 and 108.00 resistance levels against the Japanese Yen. USD/JPY tested the 109.00 resistance area and it is currently correcting gains.
Looking at the 4-hours chart, the pair settled nicely above the 108.00 zone and the 100 simple moving average (red, 4-hours). The recent high was near 108.93 before the pair started a downside correction.
There was a break below the 108.80 and 108.50 levels. The pair even spiked a couple of times below the 23.6% Fib retracement level of the upward move from the 106.48 low to 108.93 high.
However, the decline was well protected by the 108.25 zone. Moreover, there is a connecting bullish trend line forming with support near 108.40 on the same chart. If there is a fresh decline below the trend line, the pair could test the main support area near the 108.00 level.
The mentioned 108.00 support is important since it was a previous resistance and now it coincides with the 100 SMA. Besides, the 38.2% Fib retracement level of the upward move from the 106.48 low to 108.93 high is near 108.00.
Therefore, the pair is likely to bounce back as long as it is above 108.00. On the upside, there is a major resistance near the 108.80 and 109.00 levels, above which the pair could climb towards 110.00.
Fundamentally, the US Manufacturing Purchasing Managers Index (PMI) for Oct 2019 (Prelim) was released by the Markit Economics. The market was looking for a drop from the last reading of 51.1 to 50.7.
However, the actual result was positive, as the US Manufacturing PMI increased from 51.1 to 51.5. Looking at the US Services PMI, there was a minor increase from 50.9 to 51.0.
The report added:
The U.S. Composite Output Index at 51.2(51.0in September).3-month high. The Manufacturing Output Index at 52.7(51.8inSeptember).6-month high.
Overall, USD/JPY is likely to find support near 108.00 if it continues to correct lower. Besides, EUR/USD and GBP/USD are trimming gains, but still above the 1.1080 and 1.2800 support levels respectively.
Upcoming Economic Releases
- German IFO Business Climate Index for Oct 2019 – Forecast 94.5, versus 94.6 previous.
- Michigan Consumer Sentiment Index for Oct 2019 – Forecast 96.0, versus 96.0 previous.
