USD/JPY: No bottom in sight, demand for safety to continue

USD/JPY trades in the 104.10 price zone, modestly recovering from a daily low of 103.99. The pair is technically oversold, but there are no signs of a bottom just yet as concerns about global growth and new lockdowns in Europe spur demand for safety, FXStreet’s Chief Analyst Valeria Bednarik briefs.

Key quotes

“Concerns about global growth fueled by raising coronavirus cases in Europe and new localized lockdowns announced are behind the dismal market mood. In the data front, Japanese markets were closed amid a local holiday. The US session will bring the August Chicago Fed National Activity Index, foreseen at 1.95 from 1.18 in July. Also, several FOMC members will speak today, including chair Powell, although he is not due to referring to monetary policy.”

“The 4-hour chart shows that technical indicators have pared their declines but stand within oversold readings. A firmly bearish 20 SMA remains above the current level and below the larger ones, which also gain bearish strength.” 

“The USD/JPY pair may correct oversold conditions but would need to extend its recovery above 104.50 to shrug off its bearish strength, quite unlikely at the time being.”