- USD / JPY witnessed strong selling for the second day in a row amid widespread USD weakness.
- The rally in US bond yields did little to impress USD bulls or lend any support to the pair.
- A positive risk tone could undermine the JPY as a safe haven and help limit any further declines.
The pair USD/JPY It continued to lose ground early in the American session and fell to a fresh three-week low around the 114.20 area in the last hour.
The latest US CPI report released on Wednesday was not deemed worrisome enough to change the Fed’s already aggressive outlook and forced investors to undo their bullish positions in US dollars. The USD sell bias remained unchanged on Thursday, which, in turn, was seen as a key factor that dragged the USD / JPY lower for the second day in a row. This also marked the sixth day of a negative movement for the USD / JPY pair in the previous seven sessions, summing up a drop of more than 200 pips from a five-year high reached on January 4.
The USD remained depressed and failed to get any respite from US macro releases. In fact, initial weekly jobless claims unexpectedly jumped from 207,000 to 230,000 during the week ending January 7. On the other hand, the US producer price index (PPI) reached a rate of 9.7% in December, higher than the 9.6% of the previous month. This, however, disappointed market expectations that pointed to a reading of 9.8% and thus did little to impress USD bulls or stop the USD / JPY from falling to the lowest level since 23 May. December.
Meanwhile, a generally positive tone in equity markets could undermine the Japanese yen, which is a safe haven, and help limit further losses for the USD / JPY pair, at least for now. Even from a technical perspective, bearish traders could now wait for a sustained break below an upward sloping trend line, extending from the November low, before placing new bets. That said, any significant recovery attempt is more likely to attract new sales at higher levels and risks fading fairly quickly before the key psychological level 115.00.
Technical levels
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