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USD/JPY Rebounds Sharply, Can It Sustain Upward Momentum?

The USD/JPY pair staged a strong comeback by the end of the last week, recovering from a 2-month low of 118.05.

The pair has reentered its latest range, although the negative tone persists according to the daily chart, as the technical indicators remain below their mid-lines, having however, lost their negative slopes and turned higher.

In the same chart, the 100 DMA presents a mild bearish slope above the 200 DMA, both far above the current level.


In short term, the 4 hours chart shows that the technical indicators head sharply lower above their mid-lines, having maintained the positive tone ever since bottoming in extreme oversold levels. In this last chart however, the price is also well below its 100 and 200 SMAs, limiting chances of a stronger rally beyond 120.00.

Currently trading a few pips above 119.35, the immediate Fibonacci support, a downward acceleration below the level should see the pair resuming the bearish momentum seen last week, with the pair then heading back to the mentioned 2-month low, the 23.6% retracement of the latest weekly decline.

Meanwhile the U.S. consumer sentiment rebounded strongly in early October, suggesting that the economic recovery remained on track despite headwinds from a strong dollar and weak global demand that have weighed on the industrial sector, particularly manufacturing.

The snapback in sentiment reported on Friday underscored robust domestic demand and offered hope that consumer spending would remain solid enough to support economic growth, which has slowed significantly in recent months.

The University of Michigan said its consumer sentiment index rose to 92.1 in early October from a reading of 87.2 September. The survey’s current conditions sub-index shot up to 106.7 this month from 101.2 in September.

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