- USD/JPY drifts lower for the second day in a row and falls to a one-week low on Thursday.
- The selling bias of the dollar after the US CPI and the decline in US bond yields continue to put pressure on the pair.
- The risk appetite boost could undermine the safe haven JPY and help limit the downside for now.
The pair USD/JPY It attracts fresh selling near the 133.30 area on Thursday and extends the previous day’s rejection decline from the 50-day SMA. The intraday decline extends throughout the North American session and drags the pair to a one-week low, around the 131.75-131.70 area in the last hour.
The US dollar remains depressed near its lowest level since late June amid diminishing odds of a more aggressive rate hike by the Fed. In addition, a further decline in US Treasury yields The US narrows the US-Japan rate spread and benefits the Japanese Yen, which in turn puts downward pressure on the USD/JPY pair.
However, the uptick in risk, reflected in strong equity markets, could dampen gains in the safe-haven yen. The divergence between the monetary policy of the Fed and that of the Bank of Japan should give some support to the USD/JPY pair and limit the decline, at least for now.
From a technical point of view, the bulls are now looking for a break of the strong horizontal resistance at 131.50-40 to offer some support. This is closely followed by the 100-Day SMA around the 131.20 region, which if broken decisively would be seen as a new trigger for the bears and cause an aggressive technical sell around the USD/JPY pair.
The bearish trajectory could accelerate to challenge the monthly low, around the 130.40-130.35 region touched on the 2nd of August. The next relevant support is set near the key psychological level of 130.00, which should act as a pivot point for traders and help determine the next leg of a directional move for the USD/JPY pair.
On the other hand, the 132.50-132.55 zone seems to limit any recovery movement. Sustained strength beyond this zone could trigger some short covering moves and allow the USD/JPY pair to reclaim the 133.00 level. Follow-up buying, leading to a further move above the daily high around the 133.30 region, would negate the negative bias.
The USD/JPY pair could then rally to the 133.80-133.85 intermediate barrier on its way to the 134.00 level and the 134.30 resistance zone. The bullish trajectory could extend towards the key psychological level 135.00, above which the bulls could aim to conquer the strong 50-day SMA barrier, currently around the 135.20-135.25 region.
USD/JPY daily chart
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Technical levels
Source: Fx Street
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