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USD/JPY Video 17.08.20.
Japanese Yen Gains Ground Against The U.S. Dollar Despite Disappointing Japan’s Economic Reports
USD/JPY managed to get below the nearest support level at the 50 EMA at 106.60 amid broader U.S. dollar weakness.
The U.S. Dollar Index continued to slide and made an attempt to settle below the nearest support at the 93 level. In case the U.S. Dollar Index manages to get settle below the 93 level, it will head towards the recent lows at 92.50, putting additional pressure on USD/JPY.
Japan has recently provided its GDP Growth Rate report for the second quarter. On a quarter-over-quarter basis, Japan’s GDP contracted by 7.8% compared to analyst consensus which called for a decline of 7.6%.
On an annualized basis, GDP shrank by as much as 27.8%.
Japan’s Industrial Production report was also worse than analyst estimates. In June, Industrial Production grew by 1.9% on a month-over-month baiss compared to analyst consensus which called for growth of 1.9%.
On a year-over-year basis, Industrial Production was down by 18.2%.
Softer-than-expected economic reports did not put pressure on the yen as traders focused on falling U.S. government bond yields. Without any deal on the new U.S. coronavirus aid package, the U.S. dollar dynamics will heavily depend on the U.S. government bond yields in the upcoming weeks.
Rising yields make the U.S. dollar more attractive while falling yields add to existing pressure on the American currency.
Technical Analysis
USD/JPY has breached the support level at the 50 EMA at 106.60 and heads towards the test of the next support level at the 20 EMA at 106.30.
A move below the 20 EMA will mark the end of the recent upside momentum, and USD/JPY will be back to the previous downside mode.
In this case, USD/JPY will head towards the next support near 106.00.
On the upside, the previous support at the 50 EMA at 106.60 will likely serve as the first resistance level for USD/JPY. In case USD/JPY manages to get above this level, it will head towards recent highs at 107.00.
USD/JPY will likely need significant catalysts to get above 107.00 since many traders will be worried about the huge resistance in the area between 107.30 and 107.50.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire