The USD/JPY currency pair stopped its previous session winning streak and hit the intra-day low around the 105.58 regions in the last hours. Let me remind you that the currency pair witnessed the firm intraday gains of over 100 pips from weekly lows on Thursday and gained some follow-through traction through the early part of the trading action on Friday. However, the pair's bullish bias was supported by the upbeat market mood, which tends to weaken demand for the safe-haven Japanese yen.
As of now, the currency pair failed to extend its gains mainly after the PM Abe confirmed his resignation, which instantly fueled the political uncertainty and underpinned the demand of the safe-haven Japanese yen. On the other hand, the broad-based U.S. dollar weakness, in the wake of Fed Chair Jerome Powell's dovish comments at the Jackson Hole Symposium, is also considered a major factor that drags the currency pair lower. At this particular time, the USD/JPY currency pair is currently trading at 105.56 and consolidating in the range between 105.56 - 106.94.
Japan's Prime Minister Shinzo Abe is stepping down from his position due to his ill health. As per the keywords, "I cannot cling on Prime Minister (PM) post if I am not feeling my best," He further added, "My health started weakening around the middle of last month." "Decided to step down due to illness and treatment procedures." He also cleared that this was a tough decision to make. These statements came during his scheduled press conference this Friday. In turn, this raised political uncertainty and boosted the safe-haven appeal of the yen, which keeps the currency pair lower.
Across the pond, the broad-based U.S. dollar remained under pressure after the Fed Chair Jerome Powell's dovish comments at the Jackson Hole Symposium on Thursday. Powell introduced the new policy and said that the Fed is prepared to allow inflation to run hotter than normal to increase employment, suggesting that rates could remain lower for longer.
As in result, the broad-based U.S. dollar failed to gain any positive traction and edged lower on the day amid Federal Reserve's latest decision. Moreover, the losses in the U.S. dollar could also be associated with the downbeat U.S. job data, which showed that 1.006 million initial jobless claims were filed over the past week. This, in turn, fueled worries about the U.S. labor market recovery. However, the losses in the U.S. dollar kept the USD/JPY currency pair lower. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped by 0.20% to 92.802 by 12:24 AM ET (5:24 GMT).
Elsewhere, the upbeat market mood, backed by the on-going optimism over a potential vaccine/treatment for the highly infectious coronavirus, also held the U.S. dollar from placing any safe-haven bid on the day. Besides, the receding virus figure in most countries also exerted a positive impact on the market trading sentiment.
The renewed hopes of the U.S. coronavirus (COVID-19) stimulus package also favored the market risk tone. However, the hopes were fueled after the U.S. House Speaker Nancy Pelosi's told that Democratic are ready to decrease further demand to around in the middle of $2.2 trillion. Thus the upbeat market tone might help the currency pair to limit its deeper losses.
Looking forward, the second of Jackson Hole Symposium and the usual risk catalysts will be critical to watch on the day. Notably, the ongoing drama surrounding the US-China relations and updates about the U.S. stimulus package will closely be followed. In the meantime, the USD moves and coronavirus headlines will also closely followed as they could play a key role in the currency pair movements.
Daily Support and Resistance
S1 105.28
S2 105.58
S3 105.77
Pivot Point 105.89
R1 106.08
R2 106.19
R3 106.5
The USD/JPY currency pair shows a sharp bearish movement amid the breakout of the upward channel at 106.014 level. For now, it's trading at 105.345 level, heading towards the next support level of 105.125. Below this level, the USD/JPY pair may find support at 104.746 level. The RSI and MACD are both entering the oversold zone; therefore, we can expect USD/JPY to have some breather around 105 support areas. Let's keep an eye on 105 and 104.745 levels to take a bullish trade in USD/JPY pair. Good luck!