The USD/JPY pair comes under heavy selling pressure during the early North American session and drops to a three-day low, around the 132.00 round-figure mark in the last hour.

The US Dollar (USD) weakens across the board in reaction to the US Producer Price Index (PPI) and turns out to be a key factor dragging the USD/JPY pair lower for the second successive day. Against the backdrop of the softer US CPI report released on Wednesday, the US PPI print suggests that disinflation is progressing smoothly and may even accelerate. This, in turn, reaffirms expectations that the Federal Reserve (Fed) will be done with its monetary tightening after hiking one last time next month and weighs on the buck.

From a technical perspective, the USD/JPY is trapped within the 200 and 50-day EMAs at 133.70 and 133.09. the USD/JPY peaking on Tuesday at around 133.80 was difficult to surpass, as shown by Wednesday’s price action. Nonetheless, the USD/JPY needs a daily close below the 200-day EMA to cement the case for a neutral-to-downward biased, exerting selling pressure on the USD/JPY pair.

If USD/JPY achieves that scenario, the next support would be the 133.000 figure. A breach of the latter will expose the 20-day EMA at 132.70, followed by the 132.00 mark. On the other hand, a USD/JPY resumption above the 200-day EMA will exacerbate a recovery above the confluence of the 100-day EMA and the 134.00 figure. Once cleared, the USD/JPY could threaten January’s 6 high at 134.77, before reaching the 135.00 figure.

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Apr 13 2023