USD/JPY slumps toward mid-112s as DXY continues to erase this week’s gains

• Broad-based USD weakness weighs on the pair on Thursday.
• US Dollar Index turns red on the weekly chart.
• Today’s data from the U.S. reveal the negative impact of tariffs on the manufacturing sector.

The USD/JPY pair extended its slide into the NA session on Thursday and touched a fresh daily low of 112.62 as the greenback struggled to find demand following the uninspiring PMI data. As of writing, the pair was trading at 112.70, losing 0.2% on a daily basis.

Following yesterday’s rally to a new 2018 high above the 97 mark, the US Dollar Index started the month of November by staging a technical correction. In the second half of the day, the index stayed under pressure and was last seen down 0.75% on the day at 96.35. With today’s drop, the index erased all of its gains it recorded in the last three days.  

The IHS Markit’s Manufacturing PMI (final) in October eased to 55.7 from the previous estimate of 55.9. Commenting on the data, “The key area of concern remained tariffs, which were
widely reported to have contributed to another month of stalled export sales and a steep rise in prices for many inputs,”  Chris Williamson, Chief Business Economist at IHS Markit said. Additionally, the ISM’s Manufacturing Survey also showed that the business activity in the sector expanded at a slower pace than expected with the PMI slumping to 57.7 in October from 59.8 in September.  

On the other hand, some optimistic remarks on the U.S. – China trade conflict from President Trump and Xi helped the market sentiment improve in the session to allow the pair to limit its losses. At the moment, the S&P 500 and the Dow Jones Industrial Average indexes are both adding around 0.8% on the day.

Technical levels to consider

The initial resistance for the pair aligns at 113 (daily high) ahead of 113.40 (Oct. 31 high) and 114 (Oct. 8 high). On the downside, supports are located at 112.45 (50-DMA), 111.85 (100-DMA) and 111.35 (Oct. 26 low).