USD/JPY plummets to 17-day lows near 112.50 as major US indices lose more than 2%
|- Wall Street suffers heavy losses on Wednesday.
- Safe-haven JPY benefits from risk-aversion.
- US Dollar Index looks to close second straight day in red.
The USD/JPY pair came under a renewed selling pressure in the last hour as the JPY continued to gather strength as a safer alternative in the risk-off environment. As of writing, the pair was trading at its lowest level since September 24 at 112.55, erasing 0.35% on a daily basis.
Escalating concerns over the lack of progress on the trade conflict between the U.S. and China became the primary driver of the market action on Wednesday. In an interview with the Financial Times, the U.S. Treasury Secretary Steven Mnuchin warned China against devaluing its currency and said that they would only make a trade deal if they were absolutely sure that China would stop 'competitive devaluations.'
After starting the day in the red, major equity indexes in the U.S. extended their losses and the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite indexes were all last seen losing more than 2%.
In the meantime, the greenback failed to retrace yesterday's drop and edged lower on Wednesday to weigh further on the currency. The US Dollar Index was last seen down 0.16% at 99.50.
- US: Annual PPI (ex-food, energy & trade) rises to 2.9% in September.
Technical outlook via FXStreet Chief Analyst Valeria Bednarik
After spending the week hovering around a bullish 100 SMA in the 4 hours chart, the pair moved well below it, somehow suggesting a farther deterioration of buying interest. In the mentioned chart, the 200 SMA offers now a dynamic support around 112.25, a probable bearish target should the pair break below the mentioned daily low. In the mentioned chart, the Momentum indicator has bounced from oversold readings but remain well into negative territory, while the RSI indicator has settled around 30, all of which maintains the risk skewed to the downside.
Support levels: 112.25 111.80 111.40
Resistance levels: 112.90 113.20 113.60
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