- USD/JPY falls for the second day in a row and hits a new weekly low.
- A softer risk tone benefits the safe haven JPY and puts some downward pressure.
- A good rally in USD demand could provide support and limit losses.
The USD/JPY pair attracts new selling after an intraday rally to the 134.85 zone and turns lower on Thursday for the second day in a row. The pair continued to lose ground in the early stages of the North American session and falls to a week low, around the 133.75 area in the last hour.
Against a background of concern about the US debt ceiling, mixed Chinese inflation data released on Thursday fueled concerns about the second-quarter economic outlook and tempered investor appetite for riskier assets. This is evidenced by a further decline in equity markets, boosting demand for the safe-haven Japanese yen (JPY) and putting downward pressure on the USD/JPY pair.
The global flight to safety, coupled with growing acceptance that the Federal Reserve (Fed) is nearing the end of its one-year rate hike cycle, is contributing to the ongoing decline in US Treasury yields. This translates into a further tightening of the US-Japan rate differential and also benefits the yen. That being said, a good intraday rally in US dollar (USD) demand could support the USD/JPY pair.
USD bulls, meanwhile, appear unaffected by the US Producer Price Index (PPI) and a larger-than-expected rise in Weekly Initial Jobless Claims. This, in turn, could discourage traders from making aggressive bearish bets on the USD/JPY pair. However, the pair remains a short distance from the lows around 133.00 touched last Friday.
Technical levels to watch
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.
