USD/JPY: all eyes on the crucial support around 108.70 on Friday

By Admiral Markets

Source: Economic Events May 31, 2019 – Admiral Markets’ Forex Calendar

As we move into the weekly close, we should have a deeper look into the USD/JPY.

After 10-year US Treasury yields dropped to their lowest levels since 2017, and the potential of a risk-off hitting Equity markets after the SP500 CFD confirmed its double-top trend with the break below 2,800 points. This leaves the US equity index vulnerable to further losses (technically projected as low as 2,700 points), the focus in the USD/JPY switches to the crucial support region around 108.70/109.00.

While today’s economic numbers are considered to be of lesser objective interest than next week’s juicy economic docket. Disappointing US data could add further fuel to an accelerated unwinding of carry trades and capital backflows into the JPY.

If such a development arrives at the same time as a break below 108.70, a potential projected target on the downside can be found around 107.50. In the coming days, further losses as low as the January Flash Crash lows around 105.00 are a serious option.

Only if we can hold above 108.70/109.00, and go for reconquering 110.70 on a daily close, a stint as low as 105.00, the region around the January Flash Crash lows could be avoided, but seems unlikely.

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between May 2, 2018, to May 30, 2019). Accessed: May 30, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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