- Wall Street turns red and weakens the USD/JPY.
- The pair aims to test the strong support at 127.00.
- Focus on stocks, US data out.
The USD/JPY could not hold above 128.00 in the Asian session and started to pull back reaching as low as 127.07. It then bounced back and is trading at 127.40/50, before the Wall Street open.
The declines in the pair occur in the face of a continuation of the weakness of the dollar and also due to the decline in the equity markets. Wall Street futures point to a lower open around 0.60 for the Dow Jones and 1.55% for the Nasdaq. At the same time the yields of the Treasury bond pull back, giving more weakness to USD/JPY. The 10-year tranche yields 2.81%, and at 30 years it is at 3.02%.
The economic calendar ahead shows as key data the S&P Global Preliminary PMI for May US, plus new home sales and the Richmond Fed index. Federal Reserve Chairman Jerome Powell will speak at an event, where he is not expected to talk about monetary policy.
technical landscape
Short-term USD/JPY bias continues to look bearish. At the moment the declines are being contained by 127.00. If there is a break below it could give a downward acceleration. The next relevant support is at 126.30 and 125.75.
In the opposite direction, at 128.00/10 is the first strong resistance. If it rises above, the bearish tone would be relieved. Then comes 129.00 and a flat 20 day moving average at 129.25.
Technical levels
Source: Fx Street
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