USD/JPY hangs near three-week lows, just above mid-109.00s
- USD/JPY added to the overnight post-US CPI losses and edged lower for the second straight day.
- Disappointing Chinese data, COVID-19 woes benefitted the safe-haven JPY and exerted pressure.
- Rebounding US bond yields underpinned the USD and helped limit any deeper losses for the pair.
The USD/JPY pair remained on the defensive through the Asian session and was last seen hovering around the 109.60-55 region, just above three-week lows touched on Tuesday.
The latest US inflation data released on Tuesday eased concerns for an earlier than expected tapering by the Fed and triggered a steep decline in the US Treasury bond yields. This, in turn, prompted some intraday US dollar selling and exerted heavy pressure on the USD/JPY pair.
Apart from this, Wednesday's disappointing Chinese macro data fueled worries about a global economic slowdown and benefitted the safe-haven Japanese yen. This was seen as another factor that led to some follow-through selling around the USD/JPY pair for the second successive day.
In fact, China's retail sales grew at the slowest pace since August 2020, while industrial output also rose at a weaker pace in August. The data further fueled worries about a global economic slowdown amid the recent spread of the highly contagious Delta variant of the coronavirus.
That said, a modest bounce in the US bond yields underpinned the USD and helped limit any deeper losses for the major, at least for now. The USD/JPY pair, for now, has managed to defend horizontal support near the 109.50-45 region, which should now act as a pivotal point for traders.
Market participants now look forward to the US economic docket, featuring the releases of the Empire State Manufacturing Index, Industrial Production figures and Capacity Utilization Rate. This, along with the US bond yields, will influence the USD and provide impetus to the USD/JPY pair.
Technical levels to watch