- USD / JPY further loses control and tests 108.70.
- US 10-year yields remain depressed near 1.60%.
- US Advanced Retail Sales expanded 9.8% MoM in March.
The downtrend in US yields continues to weigh on the dollar, dragging the dollar down USD/JPY to fresh multi-week lows at the 108.70 / 65 zone on Thursday.
USD / JPY apathetic after US data
USD / JPY has been on the defensive since Monday and continues to follow the downtrend in US yields, particularly the 10-year benchmark, which tests the key 1.60% level so far in the second half. of the week.
In fact, the spot market has been trading negatively as investor sentiment shifts away from the US economy’s outperformance narrative and toward the progress of the economic recovery on the Old Continent.
Meanwhile, yields and the dollar remain unable to rally new buying interest despite stellar numbers from the US calendar Thursday: Initial claims increased by 576,000 weekly over the past week, top retail sales fell. expanded to 9.8% month-on-month in March and top sales increased 8.4% month-on-month.
Other upbeat data showed that the Philadelphia Fed Manufacturing Index improved to 50.2 for the current month and the NY Empire State Index improved to 26.30 in the same period.
Later in the session, US industrial / manufacturing production is expected followed by the NAHB index, capacity utilization and ICT flows. Moving forward, Bostic, Daly and Mester from the FOMC should also speak.
What to look for around the JPY
The 4-month positive streak in USD / JPY found resistance at the 111.00 zone so far (March 31), halting the strong rebound from the January lows at 102.50. The pair’s bull run was mainly bolstered by improved confidence in US yields, which in turn was supported by US inflation expectations. Also favoring the selling pressure on the Japanese yen, the BoJ’s mega-flexible stance, seen in place for the foreseeable future, has strengthened in the latest event, while speculative net longs in the safe haven have been strongly reduced in recent weeks.
Technical levels
At time of writing, the pair is shedding 0.12% at 108.79 and faces the next support at 108.40 (March 23 low) seconded by 107.85 (50-day SMA) and then 105.71 (200-day SMA). On the positive side, an overshoot of 110.96 (maximum of March 31, 2021) would point to 111.71 (monthly maximum of March 24, 2020) and finally to 112.22 (maximum of February 20, 2020).
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