USDJPY dropped steadily since the beginning of today’s trading. The currency pair opened at 109.58 and is now trading below the 109.00 psychological handle which could be due to a combination of factors.
Mixed Data from Japan
First, Japan released a roster of economic reports earlier today. Tokyo’s core CPI report for February came in at 0.5% and missed the 0.6% forecast. The country’s unemployment rate also failed to meet expectations when it came in at 2.4%. Meanwhile, the consensus was for a modest uptick of 2.2%. On the other hand, industrial production for January came in four times more than the estimate at 0.8%. Lastly, retail sales for January declined less than expected at 0.4% with the forecast at -1.3%.
Tension Rises in the Middle East
Secondly, there is rising tension in the Middle East. It was reported that 33 Turkish soldiers were killed in a Syrian airstrike earlier this morning. The attack happened in the Syrian province of Idlib which is said to be the opposition’s last stronghold and is by Turkey’s border. This incident risks bigger consequences because of the alliances involved. Syria is said to be backed by the Russian government while Turkey is a NATO member country. The US has already affirmed its allegiance to Turkey at the wake of the attack.
Consequently, this news only fueled risk aversion even more which is already heightened by coronavirus concerns.
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USDJPY Outlook
On the daily time frame, we can see that the uptrend on USDJPY is still intact. As of this writing, the currency pair is testing support at the rising trend line (from connecting the lows of August 26, January 6, and February 3). This price, around the 109.00 psychological handle, also coincides with the 100 SMA. Reversal candlesticks at this level could mean that buyers could be getting ready to push USDJPY back up to near-term resistance at 110.10 where it topped on January 17 and February 12.
On the other hand, a strong close below today’s low at 108.87 could mean that there is more downside potential to USDJPY. Support on the rising trend line will be effectively broken and the currency pair could fall to the 200 SMA for support at 108.40. If it does not hold, the next floor could be at 107.80 where USDJPY bottomed on January 7.
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