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USD/JPY Under A Sell-Off Dynamic
- USD/JPY trading below the 110 handle
- The outbreak of coronavirus triggers a risk-off sentiment in the financial markets.
The outbreak of coronavirus across China, and with suspected cases in other countries can be seen clearly in the current price action of USD/JPY across the board. It is now trading below the 110 handle. Such a move is happening due to the surge of JPY demand as a safe-haven asset and as a natural part of its dynamics. This action is putting the pair under heavy selling pressure.
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Coronavirus adding pressure on the pair
The spot also found strong resistance around 110.27. The buyers struggled to clear it out to continue extending its previous gains. Currently, the 200 SMA is being challenged by the sellers after the rallies were capped by the aforementioned hurdle.
The eyes will be on further lows if news from the virus continues to hit the wires. Currently, Chinese authorities have confirmed the first death outside the epicenter.
This raises the alarms for a massive contagious effect in what is a large country in terms of resident numbers. Once the pair manages to break below 109.22, it’s possible to see a leg lower towards the 108.71 area. This will further strengthen the bearish path in USD/JPY and opening the doors to test fresh lows.
USD/JPY bullish scenario
To the upside, however, it seems like a rebound above the 200 SMA could happen, but that’s unlikely to happen in the short term. However, in the case that it succeeds in breaking above 109.90, the focus will shift towards 110.27.
Ahead of that area, the critical barrier of 110.64 is the next tough nut to crack for the bulls’ force on a short-term basis. Technical oscillators remain in negative territory. In the case of the RSI indicator, this is now consolidating below the 30 zone, while Momentum keeps pointing downwards. However, keep an eye on its slope, because it’s slowly turning flat.