Short-Term Pressure on USD/JPY Amid Safe-Haven Demand

Market Overview

The USD/JPY pair is experiencing short-term bearish pressure as investors turn to safe-haven currencies, driven by escalating geopolitical tensions. On Tuesday, November 19th, Japanese yen and government bonds saw an uptick after Russian President Vladimir Putin updated Russia’s nuclear doctrine amidst growing tensions with the United States over Ukraine. As a result of Putin’s comments and heightened uncertainty, bond yields in Europe and the U.S. dropped. The yield on the U.S. 10-year Treasury fell by 5 basis points to 4.3648%, reaching a three-week low. This increased demand for safe-haven assets such as the yen, putting downward pressure on the USD/JPY pair.

Technical Analysis

On the one-hour chart, USD/JPY shows a clear bearish structure, with lower highs being formed consistently. The three-week ascending trendline was breached, followed by a retest near the 34-period moving average, which further increased bearish pressure. Sellers also managed to push the price below the key support at 153.830, and subsequently tested the next support at 153.416.

Despite recent long lower wicks on candles, which signal buyers’ attempts to reject lower levels, a failure to regain control could lead to further declines. Immediate targets include the 127.2% Fibonacci retracement level at 153.416. A sustained break below this could see USD/JPY heading towards lower supports at 153.200 and 152.889. Continued bearish momentum could eventually lead to a drop to the 200% Fibonacci extension at 152.308.

Oscillators Confirmation

Momentum indicators are aligned with the bearish scenario. The RSI is currently at 36.25, which suggests strong selling pressure, although it has not yet reached the oversold territory. This implies there is still scope for additional downside. Meanwhile, the MACD is in the negative territory, with widening lines indicating a strengthening bearish trend. The continued divergence between the 100-period and 34-period moving averages, along with the formation of lower highs and lows, all point to seller dominance in the short term.

Alternative Scenario

If the price manages to stabilize above the last high at the 61.8% Fibonacci retracement level at 154.411, it could challenge the prevailing bearish trend. Such a break would increase the likelihood of a bullish reversal, targeting the next resistance level at 155.352, which coincides with the 100-period moving average.

Key Support and Resistance Levels

Resistance Levels:

• 155.352 – Coincides with the 100-period moving average, crucial for reversing the bearish outlook.
• 154.411 – 61.8% Fibonacci retracement level, key for challenging the downtrend.
• 153.830 – Previous support now acting as resistance.

Support Levels:

• 153.416 – 127.2% Fibonacci retracement, currently being tested by sellers.
• 153.200 – Immediate downside target if bearish pressure persists.
• 152.889 – Key support level for continued downward movement.
• 152.308 – 200% Fibonacci extension, potential target for extended bearish momentum.

Key Events to Watch

On Tuesday, November 19th, several critical U.S. economic data points will be released that could significantly impact USD/JPY. The first data includes building permits and housing starts, where building permits are expected to reach 1.44 million units, above the previous estimate of 1.425 million units. Strength in the housing market generally indicates a healthy U.S. economy, supporting the dollar. Housing starts are forecasted at 1.340 million units, down from the previous reading, but still at a relatively high level that could provide limited support to the dollar.

Additionally, the Atlanta Fed’s GDPNow estimate for the fourth quarter remains at 2.5%, in line with previous forecasts. This indicates stable economic growth in the U.S., and if the data meets or beats expectations, it could further strengthen the U.S. dollar. Later in the day, the weekly API crude oil inventories report is due. An increase of 0.8 million barrels could influence oil prices, indirectly impacting the dollar.

On the other side of the USD/JPY pair, there are no significant economic data releases for the Japanese yen on this day. The absence of major events could mean less pressure on the yen, keeping market focus primarily on U.S. data. If U.S. figures come out strong, we may see the dollar strengthen further against the yen, potentially pushing USD/JPY higher. The lack of key events for Japan gives the dollar an edge to continue its current upside movement against the yen.

Conclusion

USD/JPY remains under short-term bearish pressure as geopolitical tensions drive safe-haven demand for the yen. A break below key support levels could lead to further downside, while stronger U.S. data could offer the dollar a reprieve, pushing USD/JPY higher if key resistance levels are surpassed.