While USDJPY is trading around 9 pips below its opening price, the technical setup of the currency pair suggests that it may have some upside potential ahead. On the 1-hour time frame, it can be seen that USDJPY is testing a confluence of support. For one, it is trading around the trendline support from connecting the lows of June 2, June 4, and June 5. Its current price, around 109.45, also corresponds to the 61.8% Fib level when you draw the Fibonacci retracement tool from the low of June 5 to its intraday high.
An hourly candle closing above today’s open price at 109.63 could mean that we may soon see USDJPY test last week’s highs at 109.84. If there are enough buyers in the market, the currency pair may even go as high as 110.15 where it topped on January 17.
For one, economies all over the world are slowly relaxing their lockdown restrictions. With these developments, investors are a bit more optimistic and are less risk averse. Second, the downward revision in Japan’s Q1 2020 GDP report may also attract bids to USDJPY. It was initially expected that the GDP report would print a 0.5% contraction for the quarter. However, the actual reading showed a bigger-than-expected decline at 0.6%.
However, as I always say, nothing is set in stone when trading a forex market. A close below today’s Asian session lows at 109.37 may hint at more downside potential. USDJPY may then fall to Friday’s lows at 109.00. If support at the psychological handle does not hold, the next floor could be at 108.60 where USDJPY bottomed on June 4.