USD/JPY pulls back from weekly highs and falls below 136.00 on safe-haven flows

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  • Risk aversion dominates the last day of June, driving the safe-haven pair.
  • USD/JPY falls from 137.00 below 136.00, weighted by falling US Treasury yields.
  • The US Federal Reserve’s favorite inflation gauge, core PCE, fell below the previous reading, indicating that the effects of the rate hike are beginning to be felt.

The USD/JPY fell on Thursday, following a worse-than-expected inflation report, which could dissuade the US Federal Reserve from tightening its monetary policy at a faster pace amid recession odds, keeping investors restless. At 135.85, USD/JPY pulls back from daily highs, away from 137.00, and back below 136.00.

Negative sentiment and falling yields a headwind for USD/JPY

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Risk aversion dominates markets as mid-quarter/month-end flows bolstered the USD. US equities continue to weigh; the dollar rises, as shown by the dollar index, which rises 0.04%, to 105,135, while US Treasury yields decline, led by the 10-year Treasury yield, which stands at 3.00%, with a drop of nine basis points.

Furthermore, fears of a recession due to stagnant global growth, coupled with high inflation, spurred a flight to safe havens. In particular, in USD/JPY, the yen remains on offer, driven by falling US Treasury yields, weighed down by lower US inflation expectations, as illustrated by interest rates. of inflation to five and ten years, which have reduced from the maximums of a year ago, around 3.59% and 3.02%, respectively, to 2.59% and 2.36%.

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Meanwhile, US inflation, measured by Personal Consumption Expenditures (PCE), increased 6.3% year-on-year, unchanged in May, according to the US Bureau of Economic Analysis. For its part, the The Fed’s favorite gauge, core PCE, which excludes volatile items, grew 4.7% year-on-year, down from 4.9% in April.

On the Japanese front, the docket revealed industrial production, which contracted faster than expected -1.3% MoM to -7.2%. On a yearly basis, it regained some ground, but remained negative at -2.8%, from a previous reading of -4.9%.

Technical levels


Last Price Today 135.6
Today’s Daily Change -0.99
Today’s Daily Change % -0.72
Today’s Daily Opening 136.59
20 Daily SMA 134.28
50 Daily SMA 131.01
100 Daily SMA 125.32
200 Daily SMA 119.61
Previous Daily High 137
Previous Daily Minimum 135.77
Previous Maximum Weekly 136.72
Previous Weekly Minimum 134.26
Monthly Prior Maximum 131.35
Previous Monthly Minimum 126.36
Daily Fibonacci 38.2% 136.53
Daily Fibonacci 61.8% 136.24
Daily Pivot Point S1 135.91
Daily Pivot Point S2 135.22
Daily Pivot Point S3 134.68
Daily Pivot Point R1 137.14
Daily Pivot Point R2 137.69
Daily Pivot Point R3 138.37

Source: Fx Street

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