USD/JPY extends corrective slide, drops to 1-1/2 week lows
| • Lack of hawkish surprise from the FOMC minutes prompt some USD profit-taking.
• Risk-off mood underpins JPY’s safe-haven demand and adds to the pressure.
The USD/JPY pair continued losing ground for the third consecutive session on Thursday and touched 1-1/2 week lows in the last hour.
The pair struggled to build on overnight modest recovery, witnessed following the release of FOMC meeting minutes, and extended its corrective slide from four-month tops touched earlier this week. The prevalent risk-off mood was seen underpinning the Japanese Yen's safe-haven demand and was seen as one of the key factors exerting fresh downward pressure on the major.
The minutes showed that the Fed would tolerate inflation rising above its goal for some time and signalled no need to accelerate the rate hike pace to catch up with inflation. In absence of any hawkish surprise, the minutes gave the US Dollar bulls to take some breather, especially after the recent relentless rally and did little to extend any support.
Meanwhile, the market had a rather limited impact from the latest comments by the BoJ board member Sakurai, saying that progress in inflation has been slower than expected and the BoJ must continue current easing for some time.
Moving ahead, today's US economic docket, featuring the second tier releases of the usual initial weekly jobless claims and existing home sales data, might provide some impetus later during the early NA session.
Also in focus would be comments by influential FOMC members - New York Fed President William Dudley and Atlanta Fed President Raphael Bostic, which might influence the USD price-dynamics and produce some short-term trading opportunities.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: “The USD/JPY pair looks set to test the psychological support of 109.00 and could go as low as 108.65 (May 4 low). A daily close below that level would confirm a bullish-to-bearish trend change.”
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