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USD/JPY falls to weekly lows after US data

  • The USD/JPY sets a fourth consecutive day of losses and trades around the 138.80 area after falling to a low of 138.42.
  • Downward revision of Unit Labor Cost and weak ISM PMIs increased the dovish bets on the Fed.
  • Declining US bond yields weigh on the US Dollar.

The USD/JPY continues to decline and fell to a low since May 24 as the weak US Dollar, driven by poor ISM PMIs and lower Q1 Unit Labor Costs, lead markets to anticipate a higher likelihood of no rate hike by the Fed at the June 13-14 meeting. In that sense, the decline in the US bond yields favors the downward trajectory of the pair.

US bond yields decline after US data

The Automatic Processing Inc. reported that the US economy added 278k jobs in May (MoM) above the 170k expected by the markets. However the figure managed to decelerate from its previous figure of 291k in April. On the other hand, Unit Labor Costs in Q1 were up by 4.2%, revised from 6.3%. Furthermore, the Institute for Supply Management (ISM) showed that the Manufacturing PMI from May came in at 46.9 vs the 47 expected from the previous 47.1.

In that sense, as the economic activity in the US continues to weaken while the Fed maintains its target rate at a considerably restrictive level, markets now discount higher possibilities of the Fed not hiking in the next meeting on June 13-14. As a reaction, US bond yields declined across the board with shorter-term rates seeing more than 1% declines on the day and applied further selling pressure on the US Dollar.

In that sense, according to the CME FedWatch tool, investors are betting on 71.6% probabilities of the Fed not hiking in their next meeting in June and maintaining the target rate at 5.00%-5.25%.

For Friday’s session, the US Nonfarm payrolls (NFP) for May are expected to show an increase of 190K below the previous 253K while hourly earnings to stagnate at 0.4% and the Unemployment Rate to slightly increase to 3.5%.

Levels to watch

On the 4-hour chart, indicators fell to negative territory indicating that the bears have the upperhand for the immediate short term. It's worth mentioning that the Relative Strength Index (RSI) indicator is approaching the oversold threshold and may suggest that some consolidation may be incoming.
If the pair consolidates losses, the upcoming resistance for USD/JPY is seen at 139.00 level, followed by the zone at 140.50 and the psychological mark at 141.00. On the other hand,if the Ninja loses ground, immediate support levels are seen at the 138.90 area, followed by the 138.50 level and the psychological mark at 138.00.

USD/JPY

Overview
Today last price138.75
Today Daily Change-0.59
Today Daily Change %-0.42
Today daily open139.34
 
Trends
Daily SMA20137.38
Daily SMA50134.97
Daily SMA100133.74
Daily SMA200137.27
 
Levels
Previous Daily High140.43
Previous Daily Low139.24
Previous Weekly High140.72
Previous Weekly Low137.49
Previous Monthly High140.93
Previous Monthly Low133.5
Daily Fibonacci 38.2%139.69
Daily Fibonacci 61.8%139.97
Daily Pivot Point S1138.91
Daily Pivot Point S2138.48
Daily Pivot Point S3137.72
Daily Pivot Point R1140.1
Daily Pivot Point R2140.86
Daily Pivot Point R3141.29

Author

Patricio Martín

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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