Technical Analysis

USD/JPY Analysis – May 18, 2021

By LonghornFX Technical Analysis
May 18, 20213 min

Intraday Support Breakout!

The USD/JPY was closed at 109.19 after placing a high of 109.50 and a low of 109.07. USD/JPY dropped on Monday and extended its losses for the 3rd consecutive session amid the weakness in the U.S. dollar. On Monday, the U.S. Dollar Index that measures the value of the greenback against the basket of six major currencies increased its losses, sustained its bearish streak for 3rd consecutive session, and reached a $90.15 level. The U.S. Treasury yield on a 10-year note declined to 1.605% in the early session but managed to recover most of its daily losses and reached 1.652%. The declining U.S. dollar index and softer tone around U.S. Treasury yields added pressure on the greenback and dragged USD/JPY prices on the downside on Monday.

On the data front, at 04:50 GMT, the Producer Price Index from Japan rose to 3.6% against the forecasted 3.1% and supported the Japanese Yen that added further losses in the USD/JPY pair. At 11:00 GMT, the Prelim Machine Tool Orders for the year from Japan came in as 120.8% in comparison to the previous month’s 65.1%. From the U.S. side, at 17:30 GMT, Empire State Manufacturing Index surged to 24.3 against the anticipated 23.9 and supported the U.S. dollar, and capped further losses in the USD/JPY pair. At 19:00 GMT, the NAHB Housing Market Index remained flat as projected 83.

Another reason behind the declining prices of USD/JPY was the rising risk-off market sentiment amid the prevailing tensions between Palestine and Israel. According to a human rights group, Amnesty International, the bombing raids conducted by the Israeli government on Palestinian women, men, and children can account for war crimes and crimes against humanity. The fears that these tensions can escalate and convert into war raised the risk-off market sentiment and supported the safe-haven Japanese Yen that ultimately dragged the USD/JPY currency pair on the downside.

The risk-off market sentiment was underpinned by the rising cases of coronavirus in Asia. The World Health organization, Soumya Swaminathan, said that there were still many parts of the country that have not yet experienced the peak.

In addition, Japan, Singapore, and Taiwan have announced new restrictive measures as they try to combat recent coronavirus outbreaks amid the fears that the Indian variant of COVID-19 was spreading throughout Asia. This raised the risk-off market sentiment and supported the safe-haven Japanese Yen that added pressure on the USD/JPY pair.

USD/JPYIntraday Technical Levels

Support Resistance

109.29 109.47

109.18 109.54

109.11 109.65

Pivot Point: 109.36

USD/JPY - Technical Outlook

The USD/JPY is trading bearish at 108.965 level, having violated an intraday support level of 109.078. Overall, the USD/JPY pair has formed a symmetrical triangle pattern that’s keeping the pair in consolidation. However, the trading range is quite broad, having an upper boundary of 109.700 – 108.650. In between this range, the USD/JPY pair was gaining support at 109.078, which has now been violated. On the lower side, the USD/JPY’s next support holds at 108.693 and 108.373 levels. Bearish bias seems dominant today. All the best!


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