USDJPY capitulates to below 140.00 amid sustained USD selling, channel breakout


  • USDJPY breaks lower amid sustained USD selling.
  • Bets for less aggressive Fed rate hikes and sliding US bond yields weigh on the buck.
  • The risk-on impulse could undermine the safe-haven JPY and lend support to the pair.
  • A more dovish BoJ might also hold back bears from placing fresh bets around USDJPY.

The USDJPY plunges lower on Friday following up the previous day's softer US CPI-inspired slump to the 140.20 area, or a two-month low. The pair is now trading below 140.00, has broken out of a long-term rising channel on an intraday basis, and if the break holds on a daily basis, could be on course to weaken substantially further, possibly even to as low as the vicinity of the 200-day Simple Moving Average in the 132.00s, if the channel breakout fullfills its price objective.

The US Dollar (USD) drops to its lowest level since August 18 during the first half of the European session and turns out to be a key factor acting as a headwind for the USDJPY pair. The latest US consumer inflation figures released on Thursday indicated that the worst of the post-pandemic price spike is over. This, in turn, reaffirms expectations that the Federal Reserve will slow the pace of its policy tightening in the coming months, which, in turn, continues to weigh on the greenback.

In fact, the current market pricing points to over an 80% chance of a 50 bps Fed rate hike in December as compared to the probability of 56.8% before the US CPI report. Moreover, expectations for peak US interest rates also dropped below 5%, which is evident from a further decline in the US Treasury bond yields. The resultant narrowing of the US-Japan rate differential offers some support to the Japanese Yen and further contributes to the USDJPY pair's intraday pullback of over 170 pips.

That said, the prevalent risk-on mood, as depicted by a strong rally in the equity markets - might hold back traders from placing aggressive bearish bets on USDJPY. Apart from this, a more dovish stance adopted by the Bank of Japan could help ease the bearish pressure. Nevertheless, spot prices remain on track to register losses for the fourth successive week and the technical picture looks decidedly bleak. Traders now look to the Preliminary Michigan US Consumer Sentiment Index for some impetus.

Technical levels to watch

USD/JPY

Overview
Today last price 140.62
Today Daily Change -0.61
Today Daily Change % -0.43
Today daily open 141.23
 
Trends
Daily SMA20 147.57
Daily SMA50 145.42
Daily SMA100 140.73
Daily SMA200 132.62
 
Levels
Previous Daily High 146.59
Previous Daily Low 141.2
Previous Weekly High 148.85
Previous Weekly Low 145.67
Previous Monthly High 151.94
Previous Monthly Low 143.53
Daily Fibonacci 38.2% 143.26
Daily Fibonacci 61.8% 144.53
Daily Pivot Point S1 139.42
Daily Pivot Point S2 137.62
Daily Pivot Point S3 134.03
Daily Pivot Point R1 144.81
Daily Pivot Point R2 148.39
Daily Pivot Point R3 150.2

 

 

Share: Feed news

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


Recommended content

Editors’ Picks

AUD/USD appreciates as US Dollar remains subdued after a softer inflation report

AUD/USD appreciates as US Dollar remains subdued after a softer inflation report

The Australian Dollar steadies following two days of gains on Monday as the US Dollar remains subdued following the Personal Consumption Expenditures Price Index data from the United States released on Friday.

AUD/USD News
USD/JPY consolidates around 156.50 area; bullish bias remains

USD/JPY consolidates around 156.50 area; bullish bias remains

USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY. 

USD/JPY News
Gold downside bias remains intact while below $2,645

Gold downside bias remains intact while below $2,645

Gold price is looking to extend its recovery from monthly lows into a third day on Monday as buyers hold their grip above the $2,600 mark. However, the further upside appears elusive amid a broad US Dollar bounce and a pause in the decline of US Treasury bond yields.  

Gold News
Week ahead: No festive cheer for the markets after hawkish Fed

Week ahead: No festive cheer for the markets after hawkish Fed

US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures