• USD/JPY meets with a fresh supply on Wednesday amid broad-based USD weakness.
  • Bets for smaller Fed rate hikes, softer US bond yields weigh heavily on the Greenback.
  • Recession fears benefit the safe-haven JPY and also contribute to the intraday decline.

The USD/JPY pair comes under some selling pressure on Tuesday and reverses a major part of the previous day's positive move, snapping a two-day winning streak. Spot prices remain on the defensive through the early European session and slip below the 130.00 psychological mark in the last hour. The US Dollar vs Yen has also reversed lower after touching a major channel line and although momentum to the downside is still relatively weak it's possible this may be the start of the next leg lower in the downtrend. 

The US Dollar struggles to capitalize on the overnight gains and meets with a fresh supply, which, in turn, is seen dragging the USD/JPY pair lower. The markets now seem convinced that the Federal Reserve will soften its hawkish stance amid signs of easing inflationary pressures and have been pricing in a smaller 25 bps rate hike in February. This keeps a lid on the recent recovery in the US Treasury bond yields and continues to act as a headwind for the Greenback.

The Japanese Yen (JPY), on the other hand, draws support from fresh speculation that high inflation may invite a more hawkish stance from the Bank of Japan (BoJ) later this year. The bets were lifted after the latest CPI report from Japan showed that consumer inflation rose to a 41-year high level of 4% in December. Apart from this, the cautious mood - amid worries about a deeper global economic downturn - benefits the safe-haven JPY and exerts pressure on the USD/JPY pair.

The downside, meanwhile, seems cushioned, at least for the time being, as traders might prefer to move to the sidelines ahead of the highly-anticipated FOMC meeting next week. In the meantime, traders will take cues from the US economic docket - featuring the release of the flash PMI prints and the Richmond Manufacturing Index.

The overall trend remains definitely bearish favoring short positions, however, the lack of impetus in the current pullback is worrying - it would be nice to see some stronger follow-through lower. A break below the January 23 lows (the last higher low) at circa 129.05, for example, would give the required green light to shorts, providing more confirmation the next leg down in the medium-term bear market for USD/JPY is underway.

Technical levels to watch

USD/JPY

Overview
Today last price 129.98
Today Daily Change -0.71
Today Daily Change % -0.54
Today daily open 130.69
 
Trends
Daily SMA20 131.01
Daily SMA50 134.62
Daily SMA100 139.99
Daily SMA200 136.73
 
Levels
Previous Daily High 130.89
Previous Daily Low 129.04
Previous Weekly High 131.58
Previous Weekly Low 127.22
Previous Monthly High 138.18
Previous Monthly Low 130.57
Daily Fibonacci 38.2% 130.19
Daily Fibonacci 61.8% 129.75
Daily Pivot Point S1 129.53
Daily Pivot Point S2 128.36
Daily Pivot Point S3 127.68
Daily Pivot Point R1 131.37
Daily Pivot Point R2 132.06
Daily Pivot Point R3 133.22

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

AUD/USD extends recovery above 0.7100 despite caution stems in market mood

AUD/USD extends recovery above 0.7100 despite caution stems in market mood

The AUD/USD pair has accelerated to near 0.7115 after rebounding from below 0.7095 in the Asian session. The Aussie asset is scaling firmly higher despite the expression of caution in the market sentiment.

AUD/USD News

EUR/USD reflects market tension around 1.0870 ahead of German GDP, Fed vs. ECB battle

EUR/USD reflects market tension around 1.0870 ahead of German GDP, Fed vs. ECB battle

EUR/USD treads water around 1.0870-60 as markets remain on a dicey floor ahead of the key central bank meetings and data. Adding strength to the market’s indecision could be the return of China and fears of a softer growth number from Germany.

EUR/USD News

Gold senses hurdles around $1,930 as market mood sours, yields extend gains

Gold senses hurdles around $1,930 as market mood sours, yields extend gains

Gold price (XAU/USD) has sensed barricades while attempting to cross the critical resistance of $1,930.00 in the Asian session. The precious metal has witnessed selling interest as investors are turning risk averse in the interest rate policy week.

Gold News

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Ethereum price has been consolidating after the January rally subsided after three weeks. This tightening continues even after BTC shot up 3% over the weekend. Therefore, a short-term spike in buying pressure should is likely. This move could propel ETH to tag immediate hurdles, liquidating early bears.

Read more

Big risk this week Fed hikes 50 points

Big risk this week Fed hikes 50 points

While the entire global investment community is apparently very excited about the US Federal Reserve slowing its rate increases to 25 point increments, there are strong reasons for arguing why another 50 point rate hike, or two, are still on the Fed menu.

Read more

Forex MAJORS

Cryptocurrencies

Signatures