USD/JPY bounces off lows, back above mid-111.00s
The USD/JPY pair remained heavily offered through the early NA session, albeit has managed to recover around 30-pips from the lowest level since Nov. 28.
The US Dollar was already under pressure against its Japanese counterpart following the BOJ moved to trim its JGB purchases on Tuesday. The selling pressure aggravated on a report that Chinese officials had recommended slowing or halting US Treasury purchases, which triggered a broad-based USD sell-off.
Adding to this, deteriorating investors’ appetite for riskier assets, as depicted by sharp declines across equity markets provided an additional boost to the Japanese Yen's safe-haven appeal and might now keep a lid on any meaningful recovery for the pair.
On the economic data front, the US import price index fell short of consensus estimates and ticked up 0.1% m-o-m in December, weaker than consensus estimates pointing to a reading of 0.5% and worse than previous month's rise of 0.7%.
Later in the day, speeches by a couple of FOMC member might influence the USD price dynamics and provide some short-term trading opportunities.
Meanwhile, the pair nursed its steep mid-European session decline to near 1-1/2 month lows and might now enter a bearish consolidation phase as investors look forward to this week’s important US macro releases, including the latest inflation figures, for fresh impetus.
Technical outlook
Valeria Bednarik, American Chief Analyst at FXStreet writes, “the pair maintains its strong bearish momentum according to technical readings in the 4 hours chart, with the price far below its moving averages that anyway continue lacking directional strength, while technical indicators continue heading lower, despite being in oversold territory. A modest bounce from here is possible, with resistances at 111.60 and 112.00 and selling interest probably resurging around this last. Below 111.20, the immediate support, the downward potential increases, with 110.87, November low, as the next bearish target.”