Key Highlights
- USD/JPY recovered nicely above 105.00 from the 104.00 support.
- A crucial bearish trend line is forming with resistance near 106.00 on the daily chart.
- The US ISM Manufacturing PMI declined from 56.0 to 55.4 in Sep 2020.
- The US nonfarm payrolls could increase 850K in Sep 2020, less than the last 1,371K.
USD/JPY Technical Analysis
After a sharp decline, the US Dollar found support near 104.00 against the Japanese Yen. USD/JPY started a decent recovery above 105.00, but it is facing many hurdles near 106.00.
Looking at the 4-hours chart, the pair gained pace after it broke the 105.00 and 105.20 levels. There was a break above the 50% Fib retracement level of the downward move from the 106.94 high to 104.01 low.
However, the pair seems to be facing a strong resistance near the 106.00 region. There is also a crucial bearish trend line forming with resistance near 106.00 on the daily chart.
Above the trend line, the 100-day simple moving average (red) is near the 106.70 level. The next key resistance is near the 107.65 level and the 200-day simple moving average (green).
If the pair struggles to continue higher above 106.00 or 106.20, there is a risk of a fresh decline. An initial support on the downside is near the 105.10 and 105.00 levels, below which the pair could revisit the 104.00 support level.
Fundamentally, the US ISM Manufacturing PMI for Sep 2020 was released yesterday by the Institute for Supply Management (ISM). The market was looking for an increase from 56.0 to 56.3 in Sep 2020.
The actual result was lower than the forecast, as the US ISM Manufacturing PMI declined from 56.0 to 55.4. Besides, the New Orders Index came in at 60.2, a decrease of 7.4 percentage points from the August reading of 67.6 percent.
The report added:
The Employment Index registered 49.6 percent, an increase of 3.2 percentage points from the August reading of 46.4 percent.
Overall, USD/JPY is facing an uphill task near the 106.00 breakout zone. Looking at EUR/USD, the pair broke the 1.1720 resistance, but struggled to clear 1.1780. Similarly, GBP/USD is still well below the 1.3000 resistance zone.
Upcoming Economic Releases
- Euro Zone CPI Sep 2020 (YoY, Preliminary) – Forecast -0.2%, versus -0.2% previous.
- Euro Zone Core CPI Sep 2020 (YoY, Preliminary) – Forecast +0.5%, versus +0.4% previous.
- US nonfarm payrolls Sep 2020 – Forecast 850K, versus 1,371K previous.
- US Unemployment Rate Sep 2020 – Forecast 8.2%, versus 8.4% previous.
