- US PPI data disappoint on Wednesday.
- US Dollar Index breaks below 95 in the NA session.
- Improved sentiment helps USD/JPY limit its losses.
After spending the majority of the day in a tight range near mid-111s, the USD/JPY pair lost its footing in the NA session and touched a fresh daily low at 111.22. As of writing, the pair was trading at 111.32, losing 0.3% on the day.
Earlier today, the data released by the U.S. Bureau of Labor Statistics showed that the Producer Price Index for final demand declined 0.1% in August to miss the market expectation of a 0.2% increase. “The index for final demand less foods, energy, and trade services edged up 0.1% in August after advancing 0.3% in both July and June,” the publication further revealed. The US Dollar Index, which was able to hold above the 95 mark since the start of the week, came under a renewed selling pressure and edged down to 94.75.
On the other hand, reports of the U.S. Treasury Secretary Mnuchin leading a new round of talks with China to give them an opportunity to resolve the issue with an aim to avoid implementing additional tariffs on Chinese imports boosted the market sentiment in the session and made it difficult for the JPY to find demand as a safe-haven.
In the early trading hours of the Asian session, Japanese Ministry of Finance will publish the securities investment report. However, ahead of the critical central bank meetings and the U.S. inflation report, the market reaction to this data is likely to be muted.
Technical levels to consider
The initial support for the pair aligns at 111.15/20 (50-DMA/daily low) ahead of 110.70 (100-DMA) and 110 (psychological level). On the upside, resistances are located at 111.60 (daily high), 112 (psychological level) and 112.70 (Jul. 12 high).
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