USD/JPY: on the way to breakout to 110?
- USD/JPY trading below 111 on dollar weakness.
- Eyes on BoJ this week.
USD/JPY is extending the downside after trading as low as 110.91 on Friday. Currently, USD/JPY is trading at 110.89 with a low of 110.82 and a high of 111.18.
The BOJ put a spanner in the works of the USD/JPY bulls when they trimmed long-term bond purchases ahead of January 23rd's meeting.
The US dollar is on the back foot and technically in danger of a sell-off according to the DXY chart. There has been a number of recent developments that has supported a bearish case for the dollar that threatens the downside to sub 110.00 in USD/JPY. Analysts at Brown Brothers Harriman explained:
The developments shaking the foundations of the dollar
"The developments from the shift in how China sets the reference rate, the wariness of some to expand its Treasury holdings, to less super-long bond buying by the BOJ and a more hawkish twist in the record of last month's ECB meeting all seemed to provide new grist to sell the greenback."
USD/JPY levels
Meanwhile, Valeria Bednarik, chief analyst at FXStreet explained that from a technical point of view, the pair is biased lower according to the daily chart, as it settled below its 100 and 200 DMAs, meeting selling interest around this last on attempts to recover ground. In the same chart, technical indicators maintain their bearish slopes near oversold readings.
"Shorter term, and according to the 4 hours chart, the 100 SMA extended its decline above the 200 SMA, both in the 112.60 price zone, while the Momentum corrected oversold conditions before turning flat below its mid-line, as the RSI indicator consolidates around 34, leaning the scale towards the downside, but suggesting that selling interest is hesitating around the 111.00 figure," Valeria added.
"If 110.85 is convincingly violated, the next technical target is near JPY110. The technical indicators are mixed and not generating a clear signal. A move above JPY112.00 would help lift the tone," the analysts at BBH argued.