The USD/JPY currency pair has recently been experiencing a corrective downside journey, pulling back from its fresh six-week highs of 133.31 to trade under 133.00. The pullback has been influenced by several factors, including the hotter-than-expected US Consumer Price Index (CPI) data, hawkish comments from US Federal Reserve (Fed) officials, and broad risk aversion that has negatively impacted global stocks.
Key Takeaways:
- The US Dollar is benefiting from risk aversion, but US Treasury yields remain a drag, causing a pullback in the USD/JPY pair from its multi-week highs.
- The expectation that the new Bank of Japan Governor Kazuo Ueda could abandon the central bank’s yield curve policy is lending support to the Japanese Yen.
- All eyes are on the US Retail Sales data due later in the NA session for fresh trading impetus.
Despite the renewed demand for the US Dollar, thanks to the dominating risk-off flows, the pair has been unable to maintain its recent uptrend. As of this writing, USD/JPY is in the red for the first time this week, trading below the 133.00 level amid expectations that the new Bank of Japan (BoJ) Governor Kazuo Ueda could likely abandon the central bank’s yield curve policy. However, the recent demand for the US Dollar is fuelling the latest uptick in the spot, with all eyes now turning toward the US Retail Sales data due later in the NA session for fresh trading impetus.
Technical Analysis
From a short-term technical perspective, USD/JPY is currently reattempting the 133.00 level after finding support near the 132.50 psychological level. The 14-day Relative Strength Index (RSI) is edging higher above the midline, indicating that the recovery momentum remains well in place. Buyers will need to take out the six-week high at 133.31 to extend the recent uptrend toward the static resistance at 133.50.
On the flip side, a sustained move below the 132.50 demand area will put the 50-Daily Moving Average (DMA) support at 132.03 under threat.
In summary, while the recent corrective downside journey has stalled near the 132.50 level, there is still a lot of uncertainty surrounding the future price action of the USD/JPY pair. As such, traders are advised to keep a close eye on the upcoming US Retail Sales data, which could provide fresh trading impetus in either direction.
USD/JPY: Additional Technical Levels
Resistance levels: 133.31, 133.50, and 133.82
Support levels: 132.50, 132.03, and 131.60