USD/JPY analysis: aimed to extend decline toward 112.50/60 region
|USD/JPY Current price: 113.50
- Tokyo inflation seen little changed in November and still far from BOJ's target.
- Depressed US Treasury yields favoring more yen gains ahead.
The USD/JPY pair bottomed for the day at 113.18, recovering from such low but with the upside limited, heading into the Asian opening around 113.50. The yen gathered support from plummeting treasury yields following Powell dovish remarks. The Fed's head hinted that rates are close to neutral, meaning that interest rates don't have an influence on the economy, nor to boost it neither to slow it down. The yield for the 10-year Treasury note, that hit a multi-year high of 3.21% last October, fell to 3.00% to finally settle at 3.03%. Japanese data released overnight was mixed, as Retail Trade surged in October by 3.5% YoY, largely surpassing the 2.6% forecast, although Large Retailer's Sales in the same month decreased by 0.8%. The Japanese macroeconomic calendar will be quite busy during this Friday, as the country will release November Tokyo inflation, October unemployment data, and preliminary Industrial Production for the same month.
So far, the 113.20 support are has held, but the risk remains skewed to the downside, with gains above 113.60 needed to ease the downward potential. In the 4 hours chart, the pair is trading around a directionless 100 SMA, while technical indicators lack directional strength around their midlines, offering a neutral short-term stance. Nevertheless, the bullish momentum has continued fading after the pair flirted with 114.00 earlier this week, increasing the risk of a downward extension ahead. Renewed selling interest below 113.20, however, should indicate increased selling pressure and expose the 112.50/60 price zone.
Support levels: 113.20 112.90 112.55
Resistance levels: 113.60 114.05 114.50
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