- A combination of factors prompted fresh selling and dragged USD/JPY closer to the monthly low.
- Recession fears benefitted the safe-haven JPY and exerted pressure amid subdued USD demand.
- The Fed-BoJ policy divergence might help limit further losses ahead of the top-tier US macro data.
The USD/JPY pair maintained its offered tone through the first half of the European session and was last seen trading around the 126.75 region, just a few pips above the daily low.
The pair struggled to capitalize on the overnight modest recovery gains, instead came under renewed selling pressure on Thursday and retreated over 100 pips from the daily swing high. The prospects for a more aggressive move by major central banks to constrain inflation, along with the Russia-Ukraine war, have been fueling recession fears. This, in turn, continued lending some support to the safe-haven Japanese yen and acted as a headwind for the USD/JPY pair amid subsequent US dollar price action.
Minutes from the May 3-4 FOMC meeting showed that most participants believed a 50 bps rate hike would likely be appropriate in June and July. This, however, was fully priced in the markets and the lack of any major surprises reaffirmed the idea that the Fed could pause the rate hike cycle later this year. This, in turn, dragged the yield on the benchmark 10-year US government bond to a fresh six-week low, which kept the USD bulls on the defensive and further exerted downward pressure on the USD/JPY pair.
With the latest leg down, spot prices have moved well within the striking distance of the monthly low touched on Tuesday. It, however, remains to be seen if bearish are able to maintain their dominant position amid a big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan. Hence, it will be prudent to wait for some follow-through selling before confirming a fresh bearish breakdown and positioning for any further near-term depreciating move for the USD/JPY pair.
Market participants now look forward to the US economic docket - featuring the release of the Prelim Q1 GDP, the usual Weekly Initial Jobless Claims and Pending Home Sales. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities.
Technical levels to watch
|Today last price||126.77|
|Today Daily Change||-0.55|
|Today Daily Change %||-0.43|
|Today daily open||127.32|
|Previous Daily High||127.5|
|Previous Daily Low||126.65|
|Previous Weekly High||129.78|
|Previous Weekly Low||127.02|
|Previous Monthly High||131.26|
|Previous Monthly Low||121.67|
|Daily Fibonacci 38.2%||127.17|
|Daily Fibonacci 61.8%||126.98|
|Daily Pivot Point S1||126.81|
|Daily Pivot Point S2||126.31|
|Daily Pivot Point S3||125.97|
|Daily Pivot Point R1||127.66|
|Daily Pivot Point R2||128|
|Daily Pivot Point R3||128.5|
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.