- The renewed selling around the USD dragged USD / JPY lower for the second day in a row on Friday.
- Positive risk sentiment could weigh on the safe-haven JPY and help limit the pair’s slide.
- Investors await US monthly retail sales data for further directional momentum.
The pair USD/JPY it falls back around 35 pips from the highs of the Asian session and falls to new daily lows, around the region of 109.30, during the European session on Friday.
The pair has struggled to capitalize on its initial rally, found new sales near the region of 109.65 and has fallen into negative territory. This movement marks the second consecutive day of fall and it is due to a renewed selling bias around the US dollar. The 10-year benchmark US and government bond yield has receded further from the 1.70% level and has kept the USD bulls on the defensive. That said, a positive tone in the stock markets could weigh on the safe-haven Japanese yen and help limit the decline in the USD / JPY pair.
Despite the evidence of rising inflation in the US, a large number of Fed officials have reiterated that price pressures in the economy would be transitory and they are unlikely to cause an immediate change in the Fed’s monetary policy stance. Fed Vice Chairman Richard Clarida said on Wednesday that weak job growth and strong inflation in April had not changed the plan of the Fed. central bank for keep monetary policy flexible. Adding to this, Fed Governor Christopher Waller said Thursday that the Fed would not raise rates until it sees inflation above target for a long time or excessively high inflation.
Market attention is therefore focused on Friday’s release of US monthly retail sales figures, which will be scrutinized for clues as to whether upward pressure on prices will persist. This will play a key role in driving the Fed’s rate expectations, which, together with US bond yields, will influence short-term USD price dynamics. Apart from this, the broader market risk sentiment could contribute to generating some trading opportunities around USD / JPY on the last day of the week.
USD / JPY technical levels
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