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USD/JPY retraces amid dovish Fed remarks, falling US yields

  • USD/JPY loses momentum, trading down 0.16% at around 149.57.
  • US Consumer Sentiment falls to 63 in October, missing forecasts and previous month’s figures.
  • Dovish comments from Fed officials, particularly Patrick Harker, weigh on USD.

The USD/JPY lost some traction influenced by falling US Treasury bond yields after softer data from the United States (US) shows Americans are growing less optimistic about the economic outlook. Additionally, dovish comments from US central bank officials weighed on the USD/JPY, which reached a high of 149.83 before sliding toward current exchange rates at around 149.57, down 0.16%.

Consumer Sentiment dives in the US, while Yen find support on intervention threats

In October, the University of Michigan Consumer Sentiment dipped to 63 from last month’s 68.1 and missed forecasts of 67.2. Joane Hsu, director of the survey, said, “After stabilizing earlier this year, concerns about inflation have grown again.” Inflation expectations for one year rose from 3.2% to 3.8%, while for five years jumped to 3% from 2.8%.

During the week, Federal Reserve’s officials, except for Governor Michelle Bowman, remained dovish, suggesting that no additional hikes would be needed. However, the latest inflation figures on the producer and consumer side were mixed, with the latter slightly tilted to the upside, spurring speculations for further tightening.

Nevertheless, in recent comments from the Philadelphia Fed, President Patrick Harker stated the Fed is likely done raising rates while adding that banks have told the Fed that there's almost no activity for first-time home buyers given the rate level.

Aside from this, the economic docket in Japan witnessed a drop in Machinery Orders, blamed on worries of a possible global economic slowdown, as China’s wobbly recovery dampens appetite to invest. However, the Japanese Yen (JPY) remains boosted by the threats of intervention by Japanese authorities, following developments of October 3, with the USD/JPY plummeting 200 plus pips after the pair reached a YTD high of 150.16.

USD/JPY Price Analysis: Technical outlook

The pair remains upward biased, but since reaching the 150.16 area on October 3, the USD/JPY has been unable to re-test the 150.00 figure after touching a four-week low of 147.27. For a bullish continuation, the pair must conquer 150.00, followed by the year-to-date (YTD) high of 150.16, before testing last year's high of 151.94. On the flip side, if USD/JPY drops below the October 12 low of 148.95, that could pave the way to test key support levels at the Tenkan-Sen level at 148.71, followed by the Kijun-Sen at 148.03.

USD/JPY

Overview
Today last price149.58
Today Daily Change-0.23
Today Daily Change %-0.15
Today daily open149.81
 
Trends
Daily SMA20148.8
Daily SMA50147.02
Daily SMA100144.14
Daily SMA200138.78
 
Levels
Previous Daily High149.83
Previous Daily Low148.96
Previous Weekly High150.16
Previous Weekly Low147.32
Previous Monthly High149.71
Previous Monthly Low144.44
Daily Fibonacci 38.2%149.5
Daily Fibonacci 61.8%149.29
Daily Pivot Point S1149.23
Daily Pivot Point S2148.66
Daily Pivot Point S3148.36
Daily Pivot Point R1150.11
Daily Pivot Point R2150.4
Daily Pivot Point R3150.98

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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