- USD/JPY remains under strong selling pressure for the second day in a row on Friday.
- Hotter inflation numbers in Japan and a softer risk tone benefit the safe-haven JPY.
- Expectations for further Fed rate hikes benefit the USD and could limit the pair’s losses.
The pair USD/JPY falls for the second day in a row on Friday and falls to four-day lows, around the 133.70 area, during the early stages of the European session. At time of writing, the pair is rallying towards the 134.00 level, still losing close to 0.20% on the day.
USD/JPY is moving away from multi-week highs around the 135.10-135.15 zone, which it hit on Wednesday. According to data released early this Friday, Japan’s Consumer Price Index (CPI) declined at a year-on-year rate of 3.2% in March, compared to the previous 3.3%. However, this rate was well above the 2.6% estimate and the Bank of Japan’s target range. Elsewhere, the core CPI, which excludes oil and food price volatility, accelerated to a 3.8% yoy from 3.5% in February, beating expectations for a 3.4% reading. This, in turn, signals increased price pressure in the world’s third-largest economy and keeps expectations alive that the Bank of Japan could start phasing out its stimulus program massive later this year.
Apart of this, weaker tone around stock markets benefits japan yen (JPY) from safe haven and contributes to the selling tone surrounding the USD/JPY pair. Investors remain concerned about financial difficulties arising from rising borrowing costs, which in turn affects global risk sentiment. Meanwhile, the flight to the safe haven causes a further fall in US Treasury yields, which translates into a narrowing of the rate differential between the US and Japan and provides additional support to the yen. That being said, the growing acceptance that the Federal Reserve (Fed) will continue to raise interest rates is acting as a tailwind for the US dollar (USD) and could help limit the pair’s decline. This, in turn, warrants some caution when entering aggressive short positions and before positioning for any significant decline.
Traders await the release of preliminary US PMI data, which will be released later in the American session. This, along with US bond yields, will influence USD price dynamics and provide some momentum to the USD/JPY pair. Beyond this, broader risk sentiment will drive demand for the safe-haven JPY and help create short-term opportunities on the last day of the week.
USD/JPY technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
