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USD/JPY struggles to find direction, trades in tight range above 112

  • A lack of fundamental data releases keeps the market volatility low.
  • Global stock indexes point to a neutral market sentiment on Monday.
  • Markets ignore Japanese trade figures.

On the first trading day of the week, the USD/JPY pair is having a difficult time determining its next short-term direction. Following Friday's sharp sell-off, the pair is moving in a 30-pip range on Monday and was last seen trading at 112.15, where it was up only 5 pips on the day.

Japanese trade data failed to meet market estimates

In the first trading hour of the week, the data from Japan showed that total merchandise trade surplus on a yearly basis dropped to ¥285.4 billion in October from ¥667.7 billion in September. Exports expanded by 14% while imports increased by 18.9% for the same period, both reading missing the market expectations. However, there was no apparent market reaction to the data. 

On the other hand, after starting the day with a bullish gap, the US Dollar Index, once again, lost its bullish momentum before testing the critical 94 handle and erased its early gains to turn flat near the 93.60 mark. At the moment, the index is at 93.65, up 0.05% on the day. Investors seem hesitant to add to their USD positions as the tax bill uncertainty remains on the back of their minds. The Senate is expected to vote on the bill next week following the Thanksgiving break.

In the meantime, major equity indexes in the U.S. are pointing to a mixed opening on Monday, suggesting that the market sentiment won't be providing a fresh catalyst to the pair either. The pair is likely to stay in its recent range for the remainder of the day.

Technical outlook

The initial support for the pair aligns at 112 (psychological level) ahead of 111.50 (200-DMA/100-DMA) and 111 (psychological level/Sep. 17 low). On the upside, resistances could be seen at 113 (50-DMA/Friday's high), 113.40 (20-DMA) and 114.05 (Nov. 9 high). Following Friday's sharp drop, the RSI indicator on the daily graph remains below the 50 mark, showing that buyers are not looking to take advantage of a bullish correction yet.

  • USD/JPY - Approaching 200-day MA support - Commerzbank

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