USD/JPY drops back closer to 138.00 mark, fresh daily low amid sustained USD selling


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  • USD/JPY comes under renewed selling pressure on Tuesday amid broad-based USD weakness.
  • Rising bets for less aggressive rate hikes by the Fed continue to weigh heavily on the greenback.
  • A positive risk tone could undermine the safe-haven JPY and help limit the downside for the pair.

The USD/JPY pair fails to capitalize on the previous day's recovery from the 137.50 area, or a three-month low and meets with a fresh supply on Tuesday. The intraday selling picks up pace during the early European session and drags spot prices back closer to the 138.00 mark in the last hour.

The overnight US Dollar bounce from a technically significant 200-day Simple Moving Average (SMA) fades rather quickly amid expectations that the Fed will slow the pace of its policy tightening. In fact, the markets now expect the US central bank to deliver a relatively smaller 50 bps rate hike in December, which led to the recent sharp decline in the US Treasury bond yields. This, in turn, continues to weigh on the USD and is seen as a key factor exerting downward pressure on the USD/JPY pair.

The Japanese Yen, on the other hand, draws support from speculations that the Bank of Japan (BoJ) will exit its ultra-lose policy stance. In fact, a Reuters poll indicated on Tuesday that more than 90% of economists expect that BoJ's next policy move will be to unwind its massive monetary easing. The change, however, is not anticipated before the latter half of 2023. This, along with a positive risk tone, could undermine the safe-haven JPY and lend support to the USD/JPY pair.

The global risk sentiment gets a boost amid hints that Chinese authorities intend to loosen COVID-19 restrictions, despite a nationwide surge in cases. This is evident from a modest uptick in the equity markets, which tends to drive flows away from traditional safe-haven currencies, including the JPY. This makes it prudent to wait for strong follow-through selling below the overnight swing low, around the 137.50 region, before positioning for any further losses for the USD/JPY pair.

Market participants now look forward to the release of the Conference Board's US Consumer Confidence Index, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will also take cues from the broader market risk sentiment to grab short-term opportunities. The focus, however, will be on Fed Chair Jerome Powell's speech on Wednesday and the NFP report on Friday.

Technical levels to watch

USD/JPY

Overview
Today last price 138.25
Today Daily Change -0.70
Today Daily Change % -0.50
Today daily open 138.95
 
Trends
Daily SMA20 142.38
Daily SMA50 144.68
Daily SMA100 141.19
Daily SMA200 134.08
 
Levels
Previous Daily High 139.42
Previous Daily Low 137.5
Previous Weekly High 142.25
Previous Weekly Low 138.05
Previous Monthly High 151.94
Previous Monthly Low 143.53
Daily Fibonacci 38.2% 138.23
Daily Fibonacci 61.8% 138.69
Daily Pivot Point S1 137.82
Daily Pivot Point S2 136.7
Daily Pivot Point S3 135.9
Daily Pivot Point R1 139.75
Daily Pivot Point R2 140.55
Daily Pivot Point R3 141.67

 

 

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