- USD/JPY remains under intense selling pressure on Thursday and slides to a one-month low.
- The selling bias picks up pace after the US Q2 GDP report confirmed a technical recession.
- Bearish traders now await a break below the 61.8% Fibo. level support, around mid-134.00s.
The USD/JPY pair witnesses heavy selling on Thursday and extends the previous day's post-FOMC decline from the 137.45 region. This marks the second successive day of a negative moves and drags spot prices to a one-month low, around mid-134.00s during the early North American session.
The latest leg down follows the disappointing release of the Advance US GDP report, which showed that the world's largest economy contracted by 0.9% annualized pace during the second quarter. This comes after the 1.6% decline during the January-March period and confirms a technical recession.
The data adds to worries about an economic downturn and reaffirms expectations that the Fed could slow the pace of rate hikes. This is evident from a fresh leg down in the US Treasury bond yields, which results in the narrowing of the US-Japan rate differential and is benefitting the Japanese yen.
On the other hand, the US dollar surrenders a major part of its intraday gains in reaction to the weaker data. This is seen as another factor contributing to the heavily offered tone surrounding the USD/JPY pair, taking along some short-term trading stops near the 135.00 psychological mark.
From a technical perspective, the overnight sustained weakness below the 200-period SMA on the 4-hour chart was seen as a fresh trigger for bears. A subsequent fall below the 50% Fibonacci retracement level of the 131.50-139.39 strong move up on Thursday validates the negative outlook.
That said, bearish traders might now wait for some follow-through selling below the 134.50 region, or the 61.8% Fibo. level support, before placing fresh bets. A convincing break below should pave the way for an extension of the recent corrective slide from the 24-year high.
On the flip side, any meaningful recovery attempt might now confront resistance near the 135.00 mark. This is followed by the 50% Fibo. level, around the 135.45 region, above which a bout of short-covering has the potential to lift the USD/JPY pair back towards the 135.90-136.00 area.
The latter is closely followed by the 200-period SMA on the 4-hour chart, around the 136.15 region, and mid-136.00s (38.2% Fibo. level). Some follow-through buying would suggest that the downfall has run its course and shift the bias back in favour of bullish traders.
USD/JPY 4-hour chart
-637946127004783488.png)
Key levels to watch
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.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.