USD/JPY heading back to 131?
It looks like the U/J has paved the way for another move lower following the release of mixed US data this week, and slumping oil prices.
The hourly chart of the USD/JPY shows the breakdown of former support at 133.40ish, as well as a short-term trend line.
From here, a move down to the next support at 132.40ish looks very likely, and if that breaks then there is little further prior reference points until the base of the former breakout at 131.00ish.
As well as some data highlighting risks that the US economy is weakening, we have seen many indicators suggesting inflation may have topped out, thus requiring less monetary tightening from the Fed. As a result, the HUGE gap between US and Japanese bond yields have narrowed. If the bond prices continue to rally, this should see the USD/JPY head lower.
Perhaps another big reason why US dollar bulls are being kept at bay is the falling prices of crude oil. Today saw oil hit levels not seen since before Russia invaded Ukraine, as WTI fell below $90 handle to trade around low-
87S at the time of writing. This is certainly disinflationary.
We have also seen other commodity prices falling sharply compared to their highs seen only a few months ago. This has been reflected in purchasing managers reporting falling prices. The ISM services PMI for example showed the ‘prices’ sub-index decreasing for the third consecutive month, down by a good 7.8 points to 72.3. Similarly, the same sub index in the manufacturing sector PMI fell quite sharply from June.
By Fawad Razaqzada on behalf of FOREX.com
The hourly chart of the USD/JPY shows the breakdown of former support at 133.40ish, as well as a short-term trend line.
From here, a move down to the next support at 132.40ish looks very likely, and if that breaks then there is little further prior reference points until the base of the former breakout at 131.00ish.
As well as some data highlighting risks that the US economy is weakening, we have seen many indicators suggesting inflation may have topped out, thus requiring less monetary tightening from the Fed. As a result, the HUGE gap between US and Japanese bond yields have narrowed. If the bond prices continue to rally, this should see the USD/JPY head lower.
Perhaps another big reason why US dollar bulls are being kept at bay is the falling prices of crude oil. Today saw oil hit levels not seen since before Russia invaded Ukraine, as WTI fell below $90 handle to trade around low-
87S at the time of writing. This is certainly disinflationary. We have also seen other commodity prices falling sharply compared to their highs seen only a few months ago. This has been reflected in purchasing managers reporting falling prices. The ISM services PMI for example showed the ‘prices’ sub-index decreasing for the third consecutive month, down by a good 7.8 points to 72.3. Similarly, the same sub index in the manufacturing sector PMI fell quite sharply from June.
By Fawad Razaqzada on behalf of FOREX.com
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