- USD/JPY is back more than 350 points from the daily low amid aggressive intraday USD selling.
- The USD increases its losses after the release of weaker than expected US macroeconomic data.
- The positive risk tone could weaken the JPY’s safe haven and help limit the pair’s losses.
The pair USD/JPY trim its intraday gains that followed the Bank of Japan policy decision and pull back to the bottom of the daily range during the early hours of the North American session. The pair currently sits around 128.00 and has moved a safe distance from its lowest level since May 2022 hit earlier this week.
As investors digest the BOJ’s dovish stance, the emergence of aggressive dollar selling turns out to be a key factor leading to the USD/JPY’s sharp intraday decline of over 350 points. The dollar adds to its heavy losses and falls to seven-month lows after the release of softer-than-expected US macroeconomic data, which prompted bets on lower rate hikes by the Federal Reserve.
Data released by the US Bureau of Labor Statistics showed that the Producer Price Index (PPI) declined at a 6.2% year-on-year rate in December. This figure was well below consensus estimates, which called for a drop to 6.8% from the downwardly revised 7.3% in November. The data also point to an easing of inflationary pressure, which could allow the Fed to slow down the pace of monetary policy tightening.
US Monthly Retail Sales also missed market expectations and fell 1.1%m/m in December, below estimates for a 0.8% decline. Excluding autos, core retail sales also contracted 1.1% during the reported month, versus a 0.4% decline expected, suggesting slowing consumer demand and reaffirming expectations that the Fed will soften its stance. aggressive line.
This, in turn, causes a further decline in US Treasury yields, which continues to weigh on the dollar. That being said, the generally positive tone around equity markets appears to be weakening the safe-haven Japanese yen. This could discourage traders from making further bearish bets on the USD/JPY pair and help limit the downside, at least for now.
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.
