USD/JPY bounces off multi-day low, keeps the red below mid-136.00s amid weaker USD

USD/JPY drifts lower on Friday amid heavy follow-through selling around the USD.
Bets for less aggressive Fed rate hikes, depressed US bond yields weigh on the buck.
Traders, however, seem reluctant ahead of next week’s key US data/FOMC meeting.

Haresh Menghani FXStreet

The USD/JPY pair comes under fresh selling pressure on the last day of the week and drops to a multi-day low, albeit lacks follow-through. The pair trims a part of its intraday losses and trades around the 136.25-136.30 region during the early European session, still down over 0.25% for the day.

The US Dollar prolongs its steady descent for the third successive day amid firming expectations for a less aggressive policy tightening by the Fed, which, in turn, is seen weighing on the USD/JPY pair. In fact, the markets seem convinced that the US central bank will slow the pace of its rate-hiking cycle and have been pricing in a 50 bps lift-off in December.

The prospects for a relatively smaller rate hike contributes to the ongoing decline in the US Treasury bond yields. This, in turn, results in the narrowing of the US-Japan rate differential, which benefits the Japanese Yen and exerts additional downward pressure on the USD/JPY pair. The downside, meanwhile, seems limited, warranting caution for bearish traders.

The incoming positive economic data from the United States has been fueling speculations that the US central bank might lift interest rates more than estimates. This might hold back traders from placing aggressive bearish bets around the USD and offer some support to the USD/JPY pair ahead of next week's key US macro data and the central bank event risk.

The market focus remains on the highly-anticipated FOMC policy meeting on December 13-14. Moreover, the latest US consumer inflation figures are also scheduled for release next Wednesday, which will influence the Fed's policy outlook. This, in turn, will play a key role in driving the USD in the near term and provide a fresh directional impetus to the USD/JPY pair.

In the meantime, traders on Friday will take cues from the US economic docket, featuring the release of the Producer Price Index (PPI) and the Prelim Michigan Consumer Sentiment Index. This, along with the US bond yields, could provide some impetus to the USD. Apart from this, the broader risk sentiment might produce some trading opportunities around the USD/JPY pair.

Technical levels to watch

USD/JPY

Overview
Today last price	136.27
Today Daily Change	-0.41
Today Daily Change %	-0.30
Today daily open	136.68

Trends
Daily SMA20	138.51
Daily SMA50	143.51
Daily SMA100	141.09
Daily SMA200	134.94

Levels
Previous Daily High	137.25
Previous Daily Low	136.25
Previous Weekly High	139.9
Previous Weekly Low	133.62
Previous Monthly High	148.82
Previous Monthly Low	137.5
Daily Fibonacci 38.2%	136.87
Daily Fibonacci 61.8%	136.63
Daily Pivot Point S1	136.2
Daily Pivot Point S2	135.72
Daily Pivot Point S3	135.2
Daily Pivot Point R1	137.2
Daily Pivot Point R2	137.73
Daily Pivot Point R3	138.2

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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