USD/JPY: more downside to come below 106.00 key support?
USD/JPY fell from 107.52 in the Tokyo high to as low as 106.57 in NY trade today, with the yen taking up the safe haven bid. Currently, USD/JPY is trading at 106.59, down -0.10% on the day, having posted a daily high at 106.77 and low at 106.58. Much lower would threaten the 106.00-importer interest level as a potential strong level of support.
The US dollar was up to test the neckline resistance within a day's range of between 90.308 - 90.698, put on to the offensive a=followng Powell's upbeat assessment of the economy and confidence in reaching the inflation target this year.
At the same time, fuelling a safe haven bid in the yen, the VIX made it through the psychological 20 level and stocks were also on the backfoot. As for US 10yr treasury yields, these dropped from 2.91% to 2.88%, unwinding Powell’s testimony leap yesterday. The two-year yields consolidated between 2.26% and 2.28% - the latter a fresh 10-year high. Fed fund futures continued to price four more hikes by end-2019. From here, the main focus is on US PCE and ISM with a close eye on EUR/JPY that has been changing hands well below the 200-D SMA target was broken for the first time since April 2017.
US data:
- US Q4 2017 PCE unrevised at 3.8pct vs. est 3.7pct and prev 3.8pct.
- US Q4 GDP price index revised down to 2.3pct vs. est 2.4pct and prev 2.4pct.
- US Q4 PCE price index revised down to 2.7pct vs. prev 2.8pct.
- US Q4 core PCE price index unrevised at 1.9pct vs. est 1.9pct and prev 1.9pct.
- US Chicago PMI Feb: 61.9 (est 64.1; prev 65.7).
- US pending home sales (m/m) Jan: -4.7% (est 0.5%; prev 0.5%).
USD/JPY levels
Valeria Bednarik, chief analyst at FXStreet explained that from a technical point of view and according to the 4 hours chart, further losses are likely for the pair:
"It's developing below the 50% retracement of its latest bullish run, also retreating further from a bearish 100 SMA, while technical indicators entered negative territory. The immediate support is now 106.54 the low set last week and the 61.8% retracement of the same run, with a break below the level opening doors for an extension toward the yearly low of 105.54 posted mid-February."