The upside for USD/JPY is still capped by fears of a global economic slowdown and the pair is trading currently below 110.00 level. The policymakers in Japan are also worried about Chinese economic slowdown and the Bank of Japan left its monetary policy unchanged at its latest meeting. The Chinese economy is heading for a rough start to 2019 and the economy is continuing to slow further. The US economy is in much better shape than the Japanese economy and according to the latest news, the US trade balance’s deficit shrank to $49.3B in November which is much better than the previous $55.5B. It is important to say that some analysts expect significant progress in the US-China trade talks but a lot of work is to be done in US-China trade talks. The US president Donald Trump said that China’s economic weakness put the United States in a very good position in terms of trade talks. This Friday, Japan will release several macroeconomic reports but according to the current market sentiment, the direction for USD/JPY remains „neutral“.
The USD/JPY has advanced above 110.00 resistance level this week but the pair is trading currently around 109.80. The political headlines are still the main market mover and the major trend is still bearish (downtrend). The US economy remains strong but the main reason why the case for raising rates has “weakened” is the trade war, Brexit and slowing growth in Europe and China. The Bank of Japan left its monetary policy unchanged and according to analysts, the Bank of Japan will keep “extremely” low-interest rates for an extended period. The pair has a short-term support area at 109.00, the short-term resistance is 110.00 and if the price breaks this level we have an open way to 110.20 and then to 110.50 resistance level.
Recommendation: If the price jumps above 110.00 resistance level it would probably reach 110.20 level very soon, the next target could be located around 110.50 resistance level. If the price falls below 109.00 (strong SELL signal) that could be a very good opportunity for the short term traders, short-term traders can put the stop loss at 109.15 and take profit at 108.60 or below.