USD/JPY losing grip of the support of the rising channel

• USD/JPY is relatively steady in Tokyo, slightly offered as the case for the upside fades away as slips below the rising channel.  
• USD/JPY is currently trading at 111.18, between the range of 111.14 and 111.31.

A lack of stimuli out here is leaving the pair vulnerable to the ebbs and flows in the greenback. Overnight, the U.S. dollar lost a bit of ground following mixed data reports and a benign CPI result earlier in the week.  

Mixed US data leaves dollar exposed to the downside

“US durable goods orders rose a stronger than expected 0.4% in January, with supportive detail, both core orders and shipments posting decent gains and upward revisions to the prior month, prompting modest upgrades to Q1 GDP expectations (the Atlanta Fed’s GDP nowcast for Q1 was lifted to 0.4% from 0.2%),” analysts at Westpac reported.  

“US data remained mixed. January’s construction data came in better than expected and rose 1.3% m/m (up from a 0.8% decline in the month prior). Durable goods orders rose 0.4% m/m (but were down from 1.3% in the month prior). That said, February’s PPI data undershot expectations with the headline rate easing to 1.9% y/y (from 2.0% last month) with the core measure at 2.3% y/y. There is no evidence of a pick-up in inflation pressures and the Fed’s hope that the steepening in the Philips curve will translate into higher inflation looks increasingly isolated,” analysts at ANZ explained.

Markets are keenly eyeing US data following the switch up at the Fed. Unless there are significant improvements and a sustained pick up in  growth, futures  markets are likely to continue pricing in a rate cut.  Futures markets, overnight,  were pricing in little chance of any further Fed rate hikes in this cycle, but a 20% chance of a cut by December. As for yields, the US 10yr treasury ranged sideways between 2.61% and 2.63%, while the 2yr yield ranged between 2.45% and 2.47%.

In other  more recent news, the  Japanese press have  cited the  Nikkei signalling that the Japanese economy slowing  down and   the government is considering a slight downgrade in its monthly report for March:

• Citing falling exports, factory output;
• Due to slower demand from China.

USD/JPY levels

The pair is now trading below the rising support of the channel and is capped by the 4hr 21 SMA.

Valeria Bednarik, Chief Analyst at FXStreet explained that  the pair is breaking below the lower end of its weekly range, ahead of Wall Street’s close, as the greenback remains under strong selling pressure:

“The 4 hours chart shows that it’s extending below the  100 SMA, after holding just above it pretty much since the week started, while technical  indicators  turned south, the Momentum now about to cross its 100 level to the downside, and the RSI currently at 41, all of it supportive of a downward extension ahead.”