- The USD / JPY extends the losses after the US CPI of the previous day and moves lower for the second day in a row.
- Disappointing Chinese data and problems caused by COVID-19 benefit the safe-haven JPY and put pressure on the pair.
- The rebound in US bond yields supports the USD and helps limit any deeper losses in the pair.
The pair USD/JPY remains on the defensive at the start of the European session on Wednesday, falling to the three-week lows around the 109.50 region.
The latest US inflation data released on Tuesday calmed concerns about an earlier-than-expected reduction in bond purchases by the Federal Reserve and triggered a sharp drop in US Treasury yields. This, in turn, triggered some intraday selling around the US dollar and put heavy pressure on the USD / JPY pair.
Apart of this, Disappointing Chinese macro data on Wednesday has fueled concerns about a global economic slowdown and have benefited the Japanese yen as a safe haven. This has been seen as another factor that has led to some continuation selling around the USD / JPY pair for the second day in a row.
In fact, China’s retail sales grew at the slowest pace since August 2020, while industrial production also increased at a weaker pace in the same month. The data further fueled concerns about a global economic slowdown amid the recent spread of the highly contagious Delta variant of the coronavirus.
That being said, a modest rebound in U.S. bond yields has supported the dollar and helped limit any deeper losses in the pair, at least for now. USD / JPY, for now, has managed to defend horizontal support near the 109.50-45 region, which should now act as a crucial point for investors.
Market participants now await the US economic calendar, with the Empire State Manufacturing Index releases, industrial production figures, and the capacity utilization rate. This, along with US bond yields, will influence the dollar and could create a boost to the USD / JPY pair.
USD / JPY technical levels
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