The key 108.20 confluence zone remain intact so far. On a technical basis, this implies that a temporary bottom on longer-term charts could be building. A look at 21 April USDJPY daily technical analysis should have us guided going forward.
21 April, AtoZForex –USDJPY has been seen holding well above the 108 handle all through the week. As discussed in our weekend piece, 108.20 was our level of interest. One would think USDJPY should be trading much lower, with soft data reports coming out from the U.S so far this week. But the obverse was totally the case. Yesterday’s fundamentals reports were softer than expected with jobless claims rising and manufacturing activity in the Philadelphia region growing at its slowest pace so far this year. Moreso, USDJPY also looked beyond the weakness in consumer spending, inflation, and manufacturing.
21 April USDJPY daily technical analysis; Daily Chart
After a brief rally to the high of 109.48 region, the pair failed to extend its gains and instead ended the session around the 109.30 handle. The key 108.20 confluence zone remain intact so far. On a technical basis, this implies that a temporary bottom on longer-term charts could be building. Fundamentally, the only argument for dollar strength is that the disappointment in U.S. data changes nothing about the outlook for U.S. monetary policy. Fed is still expected to raise interest rates at least once this year with the rate hike likely to occur in September. The Japanese Yen weakness, on the other hand, is supported by the Bank of Japan Governor Kuroda's comment that the current pace of prolonged bond purchases will continue. Which invariably means, a longer period of an easy monetary policy, which stands in contrast to the Fed's tightening agenda. Going forward, momentum still favors the bull side of the USDJPY.
21 April USDJPY daily technical analysis; 4H Chart
From the 4 hourly frame, the bottom of channel seems to be rally supportive for now. As anticipated in our weekend piece a reaction did surface around the 108.20 handle. Going forward, a rally to 109.80 and 110.50 level can not be ruled out. However, a breach of the 108.10 support should have short orders initiated. 108.10 handle should be an ideal sell stop zone for a breakout. A target for such a breakout if it happens should take us to the 106.00 support level.
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