USD/JPY gets close to critical support amid worries about Kuroda, mixed markets
  • The USD/JPY is trading close to the lows seen in September amid uncertainty about the next BOJ Governor.
  • The technical picture is pointing to further falls.

The USD/JPY is trading in the middle of the 107 handle after reaching a new daily low of 107.41. It is hovering above the trough of 107.31 that was seen in September 2017. A fall below this level will set the pair back to levels last seen in November 2016, over a year ago.

Japanese Prime Minister Shinzo Abe was unable to confirm the reports that he will reappoint incumbent Governor Haruhiko Kuroda for a second term when his tenure expires in April. Kuroda has overseen a massive bond-buying program, and the yen weakened significantly during his time. A replacement may enact a less dovish monetary policy, thus allowing the yen to strengthen.

The mood in stock markets is calm. Shares are a tad lower on Wall Street after two days of gains. The USD/JPY is less influenced by equities than in previous days. The most important economic indicator of the week is the US inflation report due tomorrow. See the preview here.

USD/JPY technical situation – leaning lower

Various technical indicators are pointing to the downside. The RSI is well below 50 but still not in oversold territory under 30. Another bearish sign is the Momentum indicator which is leaning lower. The pair is under the 50 day Simple Moving Average (SMA) and also below the 200-day SMA. The 50-day SMA recently crossed the 200-day SMA to the downside.

The 107.31 level from September is critical support. Further below, round numbers may provide more guidance. 106 can work as additional support, and the round level of 105 carries more weight.

On the upside, we note 108.05, which was the low point on Friday. Further above, 108.50 supported the pair earlier last week. 109.80 capped the pair on recovery attempts beforehand and is another line of resistance. Above 110, the 110.50 level was a swing high before the recent fall.

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