USD/JPY Forecast: Following the behavior of US Treasury yields

USD/JPY Current price: 106.16

• Japanese macroeconomic data improves modestly but failed to impress.
• US Treasury yields remained depressed throughout the week, limiting USD/JPY range.
• USD/JPY technically neutral could turn bearish on a break below 105.50.

The USD/JPY pair closed the week as it started in the 106.10 price zone, unable to attract speculative interest ever since the month started. On Friday, the pair remained confined to a tight 20 pips’ range, with its behavior tied to that of US Treasury yields. Japanese data failed to impress, as the country published the August PPI, which was up 0.2% in the month, but declined 0.5% when compared to a year earlier. The Q3 BSI Large Manufacturing Conditions Index came in at 0.1, improving from -53.3 and much better than the -44.2 expected.

This Monday, the country will publish July Industrial Production and Capacity Utilization, and the Tertiary Industry Index for the same month, foreseen at 5.2% from 79% in June.

USD/JPY short-term technical outlook

The USD/JPY pair is technically neutral, although, in the longer-term perspective, the risk skews to the downside. The daily chart shows that the price has been stuck around the 20 DMA for over a week already, while below the larger ones, which maintain modest downward slopes. Technical indicators, in the meantime, head nowhere around their midlines. In the 4-hour chart, the technical picture is also neutral, as the pair is just above congesting moving averages, while technical indicators stand around their midlines.

Support levels: 105.90 105.50 105.10

Resistance levels: 106.35 106.70 107.10

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