the main points
- USD/JPY failed to stay above the 110.00 level and started a bearish correction.
- There was a break below a deflationary triangle with support near 109.88 on the 4 hours chart.
- The US CPI rose 2.5% in January 2020 (annualized), more than the expected 2.4%.
- US retail sales are likely to rise 0.3% in January 2020 (MoM).
Technical Analysis USD/JPY
Last week, the US dollar rose above the 109.50 resistance area against the Japanese Yen. USD/JPY traded at 110.13, but struggled to stay above the 110.00 region.
Looking at the 4 hour chart, the pair started a downward correction from the 110.13 swing high. It broke through the 109.80 support level to enter a bearish zone over the short term.
Moreover, there was a break below the contracting triangle with support near 109.88. The pair even rose below the 23.6% Fib retracement level of the upward move from the 108.30 low to 110.13.
However, the 109.60 area is currently acting as a decent support. The main support is near the 109.20 level, the 100 simple moving average (red, 4 hours), and the 200 simple moving average (green, 4 hours).
Moreover, the 50% Fib retracement level of the upward move from the 108.30 low to 110.13 low is near the 109.20 support area. Thus, dips towards 109.20 may find strong buying interest.
On the upside, 110.00 and 110.20 levels are important hurdles for the bulls. A successful close above 110.20 may open the door for more volatility in the near term.
Basically, the US CPI for January 2020 was released by the US Bureau of Labor Statistics. The market was looking for a 2.4% rise in the CPI in January 2020, compared to the same month last year.
The actual result was above expectations, with the US CPI rising 2.5% (yoy). Moreover, the monthly change was +0.1%, below market expectations of 0.2%.
Overall, USD/JPY remains well supported on dips towards 109.20. Looking at the EUR/USD, the pair fell sharply below the 1.0900 support level. On the contrary, GBP/USD recovered above the 1.3000 resistance level.
Upcoming economic releases
- Eurozone GDP Q4 2019 (Preliminary) (Quarterly) - 0.1% forecast, vs. 0.1% previously.
- US Retail Sales January 2020 (MoM) - forecast +0.3%, vs. +0.3% previously.
- US Industrial Production in January 2020 (MoM) - Forecast -0.2%, vs -0.3% previously.