USDJPY Tests Key Support As Bulls Gain Strength

The US Dollar (USD) inched higher against the Japanese Yen (JPY) on Wednesday, increasing the price of USDJPY to more than 101.30 during Asia session. The technical bias remains bullish because of a Higher Low and Higher High in the recent wave on four-hour timeframe.

Technical Analysis

As of this writing, the pair is being traded near 101.43. A major support can be seen around 101.20, the horizontal support area ahead of 101.00, the psychological level and then 99.54, the swing low of the last major downside move.

On the upside, the pair is likely to face a hurdle near 102.65, a short term horizontal resistance ahead of 103.00, the psychological number and then 104.32, the confluence of horizontal resistance as well as swing high of the last major upside rally as demonstrated in the above four-hour chart.

US Non-Manufacturing PMI

Service sector activity in the U.S. grew for the 79th consecutive month in August, but at its slowest pace in more than six years, missing consensus, industry data showed on Tuesday. In a report, the Institute of Supply Management (ISM) said its non-manufacturing purchasing manager’s index (PMI) fell to 51.4 last month from 55.5 in July. That was its weakest pace since January 2010. Analysts had expected the index to drop to 55.0.

On the index, a reading above 50.0 indicates the non-manufacturing sector economy is generally expanding, below 50.0 indicates the sector is contracting. The Non-Manufacturing Business Activity Index decreased to 51.8, 7.5 points lower than the July reading of 59.3. That was the 85th consecutive month of growth, albeit it at a notably slower rate. Analysts had forecast it to fall to 58.8.

Trade Idea

Considering the overall technical and fundamental outlook, buying the pair around current levels could be a good strategy in short to medium term if we get a valid bullish reversal candle on the four-hour timeframe.

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