- USD/JPY added to this week’s heavy losses and tumbles to over three-week lows.
- Bloodbath across global equities could lead to an eventual near-term bearish break.
The USD/JPY pair continued losing ground through the early European session on Friday and tumbled to 3-1/2 week lows, around mid-108.00s in the last hour. The pair dropped closer to monthly lows and is challenging a confluence support comprising a near five-month-old ascending trend-line and the very important 200-day SMA.
Growing market concerns over the outbreak of the deadly coronavirus outside of China and its impact on the world economy deepened a weeklong global stock market rout on Friday. This might continue to boost the Japanese yen’s perceived safe-haven status and thus, support prospects for a fresh near-term bearish breakdown.
Meanwhile, technical indicators on the daily chart have been gaining negative momentum and are still far from being in the oversold territory. Some follow-through selling will reinforce the bearish bias and stage for an extension of the pair’s recent sharp pullback from multi-month tops – levels beyond the 112.00 mark set on February 20.
On the flip side, any attempted recovery now seems to confront some fresh supply near the 108.75-80 region. A sustained strength might trigger a short-covering move and has the potential to lift the pair back the 109.00 mark. The momentum could get extended, albeit seems more likely to remain capped near 100-day SMA, around the 109.20 region.
USD/JPY daily chart
Technical levels to watch