USD/JPY slumps to 110 as greenback refreshes daily lows around 92

The USD/JPY pair came under a modest selling pressure in the late NA session and dropped to a fresh daily low at 110.06. As of writing, the pair was trading at 110.27, losing 0.2% on the day.

Although there were no clear catalysts behind that recent drop, it seems to be a product of a recent greenback sell-off. The US Dollar Index, which reversed course after spiking to a 10-day high at 92.66, tested the 92 mark in the last hour after  U.S. Treasury Secretary Steven Mnuchin's remarks during an interview with Fox News dented the demand for the buck. As of writing, the index was at 92.04, dropping 0.4% on the day. Moreover, major equity indexes in the U.S. struggled to gain traction, providing an additional lift to the JPY.

Mnuchin said that Trump Administration was concerned about economic growth and less concerned about the inflation at the moment, suggesting that they were not in favor of making another 25 bps rate hike this year.

Nevertheless, the CME Group FedWatch's rate hike probability rose above the 50% threshold for the first time since July on Thursday after the data from the U.S. showed that consumer inflation, led by an increase in the cost of gasoline and rental accommodation, rose 0.4% on a monthly basis in August after edging up 0.1% in July.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, wrotes, "from a technical point of view, the pair seems poised to correct lower, although the overall bullish stance prevails, as in the 4 hours chart, the price is well above its 100 and 200 SMAs, which slowly gain upward strength, while the Momentum indicator retreats strongly within positive territory, as the RSI pulls down from overbought readings."

According to the analyst, supports for the pair could be seen at 110.25, 109.70 and 109.35 while resistances align at 111.05, 111.50 and 111.90.

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