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  • USD/JPY found bids below 200-day MA, possibly due to dismal Japanese industrial production data.  
  • The downside in JPY could be limited on BOJ policy exhaustion.  
  • The US and Japan remain at odds over linking of FX to trade.

USD/JPY is currently trading at 111.65, having hit a high and low of 111.79 and 111.45 earlier today.  

The currency pair faded the early drop below the 200-day moving average (MA) of 111.51, possibly on the back of below-forecast Japanese industrial production data.  

The factory output in March fell 0.9 percent month-on-month – the biggest drop since 2015 – amid slowing demand for exports of automobiles and manufacturing equipment. The output was forecasted to drop by 0.1 percent.  

The weaker-than-expected factory possibly took the shine off the upbeat retail sales and Tokyo core consumer price inflation number.  

That said, the gains seen in the USD/JPY could be short-lived, as markets seem convinced that the BOJ has run out of ammo. This is evident from the fact that the JPY strengthened yesterday even though the central bank revised lower inflation and growth forecasts.  

Looking forward, the pair may continue trading around the 200-day MA amid reports that the US and Japanese negotiators are at odds over linking the exchange rate (monetary policy) with the bilateral trade discussion.  

It is worth noting that the Japanese markets will be closed for the next 10 days to celebrate Crown Prince Naruhito’s enthronement. As a result, JPY pairs will likely see thin trading volumes and erratic moves next week.  

Technical Levels