US Dollar, Euro, Australian Dollar Vs Japanese Yen – Price Action:
- USD/JPY hurt by rising economic woes.
- Can USD/JPY, AUD/JPY and EUR/JPY fall from here?
- What is the trend in the yen crosses?
The Japanese yen could maintain a firm tone against the US dollar and some of its peers amid concerns about a slowing global economy following a spate of underwhelming macro data.
The G10 Economic surprise index has fallen sharply since the end of March to the lowest level since early February, raising the risk that the multi-month run of upbeat data may have run its course. For the US, data since the end of last month (from GDP personal consumption last week to Wednesday’s ADP employment change and ISM services), have sparked concerns that the economy is losing momentum as the effect of Fed rate hikes spills over.
USD/JPY Daily Chart
Chart Created by Manish Jaradi Using TradingView
Recent underwhelming US data means some of the optimism with regard to the economic growth outlook could be reassessed – until the end of last month, consensus forecasts implied just one-quarter of negative US economic growth (that is, no technical recession). Markets are now pricing in over 60% chance that US rates will be lower following its July meeting, down from pricing in one more rate hike as soon as in May.
USD/JPY – Soft bias
Ashighlighted in the previous update, USD/JPY remains in a downtrend (see colour-coded charts). The rebound in February was corrective, which ran out of steam around the 200-day moving average (DMA). This was reaffirmed by the 14-week Relative Strength Index (RSI), which was capped at 53 following the rebound – corrective rallies tend to stall around 50-55 levels of the RSI.
USD/JPY Weekly Chart
Chart Created Using TradingView
However, USD/JPY has quite strong converged support at the January low of 127.20, coinciding with the lower edge of the Ichimoku cloud on the weekly charts and the May 2022 low of 126.35. So, while the bias appears to be soft for USD/JPY, the downside could be limited for now. USD/JPY would need a strong catalyst to decisively break below the 126.35-127.20 support area, including a spike in risk aversion or a global weakness in USD. On the upside, last week’s high of 133.75 marks as initial resistance; a stronger barrier is on the 200-DMA (now at about 137.25).
AUD/JPY Weekly Chart
Chart Created by Manish Jaradi Using TradingView
AUD/JPY – Looking vulnerable
AUD/JPY is looking vulnerable as it tests crucial converged support: a horizontal trendline from May 2022 (at about 87.40), slightly above another horizontal trendline from early 2021 (at about 85.70). A decisive break below could pave the way toward the 200-week moving average (now at 81.60).
EUR/JPY Weekly Chart
Chart Created by Manish Jaradi Using TradingView
EUR/JPY – Range with downward bias
Directional movement indices on the weekly charts suggest (up)trending conditions prevalent since 2020 have run their course for now. EUR/JPY could remain in the recently formed range of 137-146 with a bias toward the lower edge of the range in the near term. Strong support is on the 89-WMA, coinciding with the lower edge of the Ichimoku cloud on the weekly charts (around 135.00).
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--- Written by Manish Jaradi, Strategist for DailyFX.com
--- Contact and follow Jaradi on Twitter: @JaradiManish
