- Wall Street erases the majority of early losses.
- US Dollar Index continues to move sideways below 96.
- USD/JPY remains on track to close the day in the red.
After sliding below the 112 handle in the early NA session, the USD/JPY pair retraced a portion of its daily fall as the improving market sentiment forced the safe-haven JPY to weaken against its rivals. As of writing, the pair was trading at 112.45, still losing 0.3% on a daily basis.
The bearish pressure surrounding the USD/JY pair on Tuesday picked up as major equity indexes started the day sharply lower. With both Dow Jones Industrial Average and the S&P 500 losing over 2% during the first half of the session, the pair extended its losses. However, Wall Street gained traction and erased most of its daily losses to help the pair reverse its course. At the moment, the DJIA was down only 0.4% while the S&P 500 was losing 0.2%.
Meanwhile, the US Dollar Index is struggling to find direction following yesterday’s rally amid a lack of significant macroeconomic data releases. Speaking at an event organized by the Louisiana State University, Atlanta Fed President Raphael Bostic said that he was in favour of a fourth rate hike in 2018 and argued that possible headwinds wouldn’t throw the Fed off track.
In the early trading hours of the Asian session on Wednesday, Nikkei Manufacturing Index and Leading Economic Index from Japan will be looked upon for fresh impetus. Later in the day, Markit is going to publish the manufacturing and service sector PMI reports for the U.S.
Technical levels to consider
On the downside, supports for the pair could be seen at 112/111.95 (psychological level/daily low), 111.70 (100-DMA) and 111.15 (Sep. 13 low). On the upside, the initial resistance aligns at 112.85 (daily high/20-DMA) ahead of 113.30 (Oct. 10 high) and 113.90 (Oct. 8 high).