USDJPY pair faces some selling pressure and appears to have broken a three-day gaining streak.
On Wednesday, the USDJPY pair faces some selling pressure. And appears to have broken a three-day gaining streak to its highest level since July 7. Around the 143.55 zone touched the previous day. Fitch unexpectedly reduced the United States’ Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’. Citing fiscal deterioration over the next three years. This, in turn, increases demand for the safe haven Japanese yen (JPY). And proves to be a significant contributor. Considering the major.
Meanwhile, the global flight to safety has resulted in a small fall in US Treasury bond yields. Keeping US Dollar (USD) bulls on the defensive below a multi-week high achieved on Tuesday. This contributes to the offered tone surrounding the USDJPY pair. Albeit the Federal Reserve’s (Fed) and Bank of Japan’s (BoJ) different policy stances restrict losses. It is important recalling that Fed Chair Jerome Powell stated. That the economy must still slow and the labor market weaken for inflation to return to the 2% target meaningfully.
The Fed-BoJ policy difference should help minimize any significant decline in the major.
Furthermore, the incoming US macro data signals to an extraordinarily strong economy. Opening the possibility for another 25-basis point increase in September or November. In contrast, the minutes of the Bank of Japan’s policy meeting, which were disclosed earlier today, revealed. That members agreed to keep the current easy monetary policy in place. This follows BoJ Governor Kazuo Ueda’s dovish statements last Friday. In which he reiterated that the central bank will not hesitate to loosen policy. Further if necessary, and that more time is required to stably achieve the 2% inflation objective.
Furthermore, BoJ Deputy Governor Shinichi Uchida rejected calls to discontinue the negative interest rate policy sooner and supported the Yield Curve Control (YCC) program. Uchida noted that Japan is now at a phase where it is critical to maintain the ultra-easy monetary policy carefully, and that the BoJ will intervene before the 10-year yield reaches 1.0%, depending on the rate of inflation. This should limit any major gains for the JPY and encourage prospects for some dip-buying in the USDJPY pair, requiring care from bearish traders.
Market players are now anticipating the release of the US ADP report.
Market players are now anticipating the release of the US ADP report on private-sector employment later in the early North American session. This, together with US bond yields, may influence USD price dynamics and provide some momentum to the USD/JPY pair. Aside from that, the overall risk attitude will contribute to the creation of short-term trading chances. The attention, though, will remain on Friday’s release of the carefully watched US monthly job figures, known colloquially as the NFP report.
USDJPY Technical Outlook
Technically, any subsequent fall is more likely to discover good support in the 142.35-142.25 area, which represents the 23.6% Fibonacci retracement level of the recent strong rebound of around 550 pips from the 138.00 area.
This is followed by the 142.00 level, below which the USDJPY pair may accelerate its corrective slide towards the 38.2% Fibo. level, which is located between 141.50-141.45.
Some follow-through selling could push spot prices much lower, targeting the 140.80-140.75 support level, or the 50% Fibo. level.
On the other hand, the 143.00 level appears to be acting as an immediate barrier ahead of the nighttime swing high, which is expected to be around 143.55.
A prolonged rally should help the USDJPY pair to retake the round number of 144.00. The momentum may be continued further to the 144.65-144.70 intermediate level. Levels just above the 145.00 psychological line were reached in June, the way to the YTD peak.
