USD/JPY Forecast: Pressure mounts on the dollar

USD/JPY Current price: 102.88

• Japan’s December  Jibun Bank Manufacturing PMI came in at 50, improving from 49.7.
• Equities extend their year-end rally, Wall Street reaches all-time highs.
• USD/JPY is at risk of extending its decline, with investors eyeing 101.17.

The American dollar is in sell-off mode as market players return from a long holiday, and USD/JPY trades around 102.90 after hitting 102.70, its lowest since March 2020, when coronavirus-related panic sent it to 101.17. Global stocks are sharply up, with US futures flirting with all-time highs, as investors monitor restrictions and vaccines developments. Immunization has slowly kick-started around the world, although the number of new cases and deaths is rapidly rising. Restrictive measures are already in place, and additional ones are being studied.

In Japan, a curfew has been announced in Tokyo starting 8 pm, as bars and restaurants have been asked to close at that time, while people have been asked to stay in unless urgent needs.

Data wise, Japan published the December Jibun Bank Manufacturing PMI, which came in at 50, improving from 49.7. The US session will bring the December Markit Manufacturing PMI, previously at 56.5, and speeches from Fed’s Evans and Bostic.

USD/JPY short-term technical outlook

From a technical point of view, the USD/JPY pair is bearish. The 4-hour chart shows that the 20 SMA keeps accelerating south above the current level and below the larger ones. Technical indicators, in the meantime, remain near daily lows, paring their declines but far from suggesting an upcoming recovery. Further declines are expected on a break below the mentioned daily low, with investors eyeing a test of the mentioned 101.17.

Support levels: 102.70 102.30 101.95

Resistance levels: 103.10 103.50 103.90

 View Live Chart for the USD/JPY