USD/JPY Forecast: Bulls eyeing a long-term descendant trend line

USD/JPY Current price: 103.93

• US Treasury yields kept advancing on hopes for additional stimulus.
• Japan’s Leading Economic Index improved in November, according to preliminary estimates.
• USD/JPY bullish potential depends on a break above the 104.50 price zone.

The USD/JPY pair hit on Friday 104.08, its highest in three weeks, to settle just below the 104.00 threshold. As it happened for most of the week, the pair found support in US Treasury yields, which advanced to levels that were last seen in March 2020. The yield of the benchmark 10-year note hit 1.13% despite the disappointing Nonfarm Payroll report, finishing the week at 1.12%. Wall Street posted modest gains, as job’s loss fueled speculation for additional stimulus.

Japan published on Friday The preliminary estimate of the November Leading Economic Index, which beat expectations, improving to 96.6 from 94.3. The Coincident Index for the same period, however, resulted at 89.1 from 89.4 previously. Japan celebrates a holiday this Monday, and won’t publish macroeconomic data.

USD/JPY short-term technical outlook

The USD/JPY pair is bullish in the daily chart, as it has settled above its 20 SMA for the first time in almost two months. The Momentum indicator heads firmly higher well into positive territory, while the RSI loses bullish momentum but stands around 54. A daily descendant trend line coming from March 2020 comes at around 104.50, and gains beyond it could anticipate a more sustainable advance. The 4-hour chart shows that technical indicators are retreating modestly from overbought levels, while the pair is above all of its moving averages, all of which maintains the risk of a steeper decline limited.

Support levels: 103.60 103.25 102.80  

Resistance levels: 104.05 104.30 104.75

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