USD/JPY drops below 10-DMA ahead of China data

Broad based USD weakness pushed Dollar-Yen pair below 10-DMA level of 103.74 ahead of the data in China which is expected to show third quarter growth rate remained steady at 6.7% y/y.

Rejected 38.2% Fibo

Dollar bulls made their presence felt yesterday but lacked strength to ensure the pair extended gains above 104.17 (38.2% of Brexit day low and post Brexit high). This is despite the rise in the long duration treasury yields.

Moreover, the steepening of the yield curve since Friday is being read as a sign that markets see Fed moving rates slower than expected.

Furthermore, low US core inflation did not help matters either. The immediate focus is on China data.

USD/JPY Technical Levels

A break above 104.17 (38.2% of Brexit day low and post Brexit high) may not be sufficient as the real test would be whether the pair manages to hold above September high of 104.32. If it does, fresh demand could send the pair higher to 105.44 (23.6% of Brexit daylow – post Brexit high). On the lower side, strong support is seen at 103.14 (50% Fibo + 100-DMA), under which psychological support of 103.00 may not hold long, thus eventually making way for a further slide to 102.11 (50-DMA).