- Falling US bond yields benefits the Japanese yen.
- Fears of higher inflation and a struggling job market surround the US economy.
- The US ISM Manufacturing PMI was better than expected.
The USD/JPY it is losing for the second day in a row, down 0.31% and trading at 110.95 during the American session at the time of writing.
The pressure is weighing on the US dollar. Fear of rising prices, worse-than-expected employment data and a hesitant Federal Reserve chairman, Jerome Powell, torn between tackling inflation or making employment gains dampens market sentiment. Additionally, US political uncertainties around the debt ceiling and infrastructure spending play their part by putting downward pressure on the USD / JPY pair.
The yield on the US 10-year bond is down almost four basis points, standing at 1,489%, falling for the second day in a row. Meanwhile, the US Dollar Index, which tracks the dollar’s performance against six pairs, is down 0.21%, currently at 94.05, as we approach the weekend.
US ISM Manufacturing PMI had the biggest expansion in four months
Meanwhile, the US ISM Manufacturing PMI for September rose to 61.1, better than the 59.6 expected by analysts. The growing demand for factory products boosted the reading. Meanwhile, the University of Michigan Consumer Confidence rose to 72.8 more from the 71 forecast. Although it remained near pandemic lows, Americans are a bit more optimistic about current economic conditions.
As for the Fed’s favorite inflation reading, the Personal Consumption Spending Index for August rose 4.3% year-on-year, one tenth above expectations. It is the largest increase since 1991.
USD / JPY Price Forecast: Technical Outlook
On the daily chart, USD / JPY is approaching last Friday’s close around 110.73, so for buyers or sellers, it is crucial to be vigilant. A daily close below the latter could put downward pressure on the pair. The first support on its way to the downside would be the August 11 low at 110.44, followed by the confluence of the 50- and 100-day moving average around 11.10.
On the other hand, a daily close above 110.73, the first resistance would be the psychological level of 111.00. A sustained break above could expose key resistance levels, July 2 high at 111.65 and then 112.00
The Relative Strength Index is at 58, bounced off the oversold levels, and is slightly lower but above the 50 midline, supporting the bullish bias.
ADDITIONAL LEVELS
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