USD/JPY: Limited upside while below 104.40

USD/JPY is trading around 103.60, modestly up for the day, as the dollar is grabbing some attention. The pair would turn bullish only on a move beyond 104.40, Valeria Bednarik, Chief Analyst at FXStreet, reports.

Key quotes

“The market’s mood turned sour. It doesn’t seem to be a clear catalyst behind the U-turn in sentiment, although poor UK Retail Sales figures and mixed growth data coming from the EU exacerbate the dismal sentiment. Also, concerns about lockdown extensions and tighter restrictive measures weigh on the sentiment.”

“Japanese data resulted mixed. December National inflation worsened from -0.9% to -1.2% YoY, slightly better than anticipated. The core reading which excludes fresh food prices, printed at -1%. The preliminary estimate of the January Jibun Bank Manufacturing PMI contracted to 49.7 from 50 in the previous month, missing expectations of 50.5.”

“The bullish potential is limited as long as the USD/JPY pair remains below the 104.30/40 price zone, while the risk of a steeper decline would increase on a break below 103.25.”