The US Dollar (USD) extended downside movement against the Japanese Yen (JPY) on Monday, dragging the price of USDJPY to less than 119.40 during the Asian session as the financial markets re-open after the new year’s holidays. The technical bias remains positive because of a Higher Low and Higher High in the recent downside move.
As of this writing, the pair is being traded around 119.26. A support may be seen near 119.00, the psychological number ahead of 118.37, the 23.6% fib level and then 116.07, the swing low of the last major downside move as demonstrated in the following daily chart.
On the upside, the pair is expected to face a hurdle near 119.50, the psychological number ahead of 119.80, the 38.2% fib level and then 120.95-121.00, the confluence of 50% fib level as well as psychological number. The technical bias will remain positive as long as the 118.05 support area is intact.
Meanwhile the Caixin China General Manufacturing PMI for December is 48.2, down 0.4 points from the reading for November. This shows that the forces driving an economic recovery have encountered obstacles and the economy is facing a greater risk of weakening. More fluctuations in global markets are expected now that the U.S. Federal Reserve has started raising interest rates. The government needs to pay more attention to external risk factors in the short term and fine-tune macroeconomic policies accordingly so the economy does not fall off a cliff. It needs to simultaneously push forward the supply-side reform to release its potential and reap the benefits.
Considering the overall technical and fundamental outlook, buying the pair can be a good strategy if we get a valid bullish reversal candle on the four-hour or daily chart.