USD/JPY dropped to 105.54 overnight before closing at 106.29 in NY. Currently, USD/JPY is trading at 106.87, up 0.17% on the day, having posted a daily high at 106.90 and low at 106.66.
The US yields were falling back overnight and the DXY was sent on to its backfoot weighed down also by the EUR/JPY's proximity to the 200-D SMA at 131.14. The move was no surprise given how much the pair had been lagging behind the rest of the pairs on the back of the FOMC minutes.
In terms of US data, the US initial jobless claims Feb-17: 222k (est 230k; prev r 229k). Continuing jobless claims Feb-10: 1.85m (est 1.930m; prev r 1.948m). Regardless, the DXY had been moving to the downside within a range of between 89.635 - 90.235.
Also, the US 10yr treasury yields had been paring the previous day’s gains. The three-year high was shortlived at 2.95% when the yields dropped to 2.91%. The 2yr yields, these fell from 2.27% to 2.25%. The market is currently pricing in five hikes, three in 2018 and two in 2019. (Fed fund futures yields are pricing in the chance of another rate hike in March as a cert).
In respect to Japan, the CPI Jan data arrived as follows:
- National CPI y/y: 1.4% vs expected 1.3%, prior was 1.0%.
- National CPI y/y excluding Fresh Food: 0.9% vs expected 0.8%, prior was 0.9%.
- National CPI excluding Food, Energy y/y: 0.4% vs expected 0.3%, prior was 0.3%.
USD/JPY levels
There are option barriers between 105.00-104.00 guarding a retracement of the post-Trump rally to 101.95.
Valeria Bednarik, chief analyst at FXStreet explained that the pair is bearish according to technical readings in the 4 hours chart:
"Technical indicators extended their declines to enter negative territory, while the pair continues developing well below its moving averages. Now struggling with a Fibonacci support, the pair will have more chances of extending its decline towards its recent lows sub-106.00 on a break below the mentioned daily low."
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