- USD/JPY has dropped to a low of 113.58 having lost the 114 handle as the yen picks up a safe haven bid as global stock prices continue to fall.
- USD/JPY is currently trading at 113.62 falling from 113.86 ahead of key US CPI and Japanese GDP data this week.
USD/JPY is closely correlated to the global equities and after a slightly better performance in Asia yesterday, US stocks were unable to follow suit with the main focus of concern was over weaker demand for iPhones, with Apple sliding. President Trump tweeted that, “The prospect of Presidential Harassment by the Dems is causing the Stock Market big headaches!” A divided Congress could undermine confidence in the ability for US assets to retain their competitive edge and on Monday, USD/JPY fell from 113.90 to a low of 113.72 in NY trade, where otherwise, the DXY was making fresh highs.
With respect to US yields, US 10yr treasury futures implied yields fell from 3.18% to 3.15%. Fed fund futures yields continued to price the chance of another rate hike in December at 75%. We also heard from the New SF Fed president Mary Daly who said she would not be surprised by a Dec rate hike and at least two more in 2019. We will now wait to hear from Kashkari, Brainard and Harker slated to speak.
Looking ahead:
Looking ahead, markets await the US CPI data and Japanese real GDP that may have swung to negative growth again in Q3 after positive Q2 growth. On US CPI, core inflation is expected to remain at 2.2% YoY and surveys suggest retail sales are set to stay strong.
USD/JPY levels
- Support levels: 113.85 113.40 113.00.
- Resistance level: 114.10 114.55 114.90.
Valeria Bednarik, Chief Analyst at FXStreet, explained that the pair finished the day as it started it, losing bullish potential in the last trading session but still far from bearish:
“In the 4 hours chart, technical indicators are now consolidating right above their midlines, coming straight from near overbought readings. The 100 and 200 SMA in the mentioned chart maintain modest bullish slopes around 112.90, with a break below them probably anticipating a steeper decline for this Tuesday. Above 114.20, on the other hand, the next possible bullish target is 114.54, October monthly high.”
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