- USDJPY remains on the defensive on Friday and is pressured by a combination of factors.
- Stronger domestic inflation numbers support the JPY and offer some support for the pair.
- The low demand for dollars also acts as a headwind, although the fall continues to be cushioned.
The pair USDJPY comes under some selling pressure on Friday and reverses some of the previous day’s positive move nearing the weekly high. The pair remains on the defensive during the early hours of the European session and is currently trading around the key 140.00 psychological level, shedding 0.15% on the day.
The US dollar continues its struggle to post a meaningful recovery after the CPI plunged to a three-month low hit on Tuesday and acts as a headwind for the USDJPY. On the other hand, the Japanese yen is getting some support from Friday’s release of stronger domestic consumer inflation data, which showed that core CPI accelerated to a 40-year high in October. This puts additional downward pressure on the major currency, although it appears that a significant drop has not yet taken place, at least for now.
Recent comments from US central bank officials suggest more interest rate hikes are on the way. This, in turn, pushes US Treasury yields higher and should give the dollar some support. In contrast, the Bank of Japan says the central bank will maintain its monetary easing to support the economy and hit the 2% inflation target on a sustained and stable basis. This signals a large divergence in the monetary policy stance of the two major central banks, which could weigh on the yen.
Apart from this, the risk momentum – as evidenced by the upbeat mood around equity markets – could further undermine the JPY’s safe haven and offer USDJPY support. Even from a technical perspective, spot prices have been oscillating in a known trading range since the start of this week. This points to indecision about the near-term path of the major pairs. That being said, the repeated failures ahead of the breakout of the 100-day SMA support around 141.00 suggest that the downtrend may still be far from over.
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.
