USD/JPY price has rotated lower on Friday after a failure to close above the $107 mark. The price action is now heading lower towards the nearby support at $106.10.Fundamental analysis: Dollar rally fading
After it has staged a relief rally fueled by strong U.S. jobs data and stronger global demand for safe-haven assets, the U.S. dollar has continued to weaken. USD/JPY price gained 0.6% last week, helping the dollar to break the 7-week losing streak.
Commodity currencies also lost some ground after weak retail and production figures in China raised concerns in Asia, harming the Australian and New Zealand dollars. Industrial production in China experienced a slowdown in July with the retail sales dropping for a seventh consecutive month.
“Risk sentiment is slowing down,” stated Imre Speizer, an analyst at Westpac FX. “It’s too early to say the whole (dollar) downtrend is over…but it’s got potential and at the very least it’s putting a cap on the Aussie and kiwi.”
Asia is also becoming the area of concern, with an increase in new coronavirus cases in New Zealand, which still hasn’t decided whether to stop or extend the lockdown measures in Auckland, while South Korea registered a sharpest daily jump in new cases.
The weekly figure of applications for unemployment compensation in the U.S. fell above 1 million for the first time since the beginning of the epidemic.
However, the situation in the U.S. remains to be disturbing as nearly 30 million American citizens are without jobs and the stimulus package to revive the economy has stalled in Washington.Technical analysis: USD/JPY turns lower
USD/JPY price has opened a new week to trade around 0.2% lower after three consecutive attempts to break above $107 failed. A rotation lower has followed these failures as sellers assume a short-term control of the price action.USD/JPY daily chart (TradingView)
Looking lower, the sellers will look to test the former resistance at $106.10. This level may provide an opportunity for buyers to jump in, while the sellers will hope to trigger stops sitting below the $106 handle. The next support lower is located at $105.30.Summary
Although the USD rose on promising U.S. jobs data last week to stop its 7-week losing run, the greenback has failed to clear the $107 handle, prompting a rotation lower towards the $106.10 support line.
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