USD/JPY: Yen gains as risk-off grips Asia, hovers around 121 handle

FXStreet (Mumbai) - USD/JPY took a breather in its recent upward rally and extends the drop in the Asian session, as the safe-haven status of the Japanese yen was bolstered after risk-aversion resurfaced amid Chinese equities falling back in the negative territory.

USD/JPY stalls a 4-day rally

Currently, the USD/JPY pair trades -0.48% lower at 121.12, clinging to 121 handle. The major failed to extend towards 122 handle and slipped to 121 support on a yet-another occasion as the Japanese yen benefitted from renewed round of risk-aversion spread across Asia following weaker Chinese stocks re-igniting China fears.

Moreover, the yen rallied against the greenback despite downbeat Japan’s industrial production data released earlier this session. Japan’s industrial output unexpectedly fell in July, sapping a rebound in the economy from a slump last quarter. Output fell 0.6% from June, when it increased 1.1%, compared with the median forecast for a 0.1% gain in Bloomberg survey.

In the week ahead, the major is expected to be highly influenced by the US non-farm payrolls data which may set the tone for Fed interest rate-hikes this year.

USD/JPY Technical levels to consider

To the upside, the next resistance is located 121.38 (Today’s High) levels and above which it could extend gains 122.04 (Aug 24 High) levels. To the downside immediate support might be located at 120.41 (Aug 25 High) below that at 120 (Psychological levels).