Mon, Mar 27, 2023 @ 20:32 GMT
HomeContributorsTechnical AnalysisDollar/Yen Extends Plunge To Key 108 Support On Weaker Dollar, Surging Yen

Dollar/Yen Extends Plunge To Key 108 Support On Weaker Dollar, Surging Yen

A weak US dollar was further pressured last week after key inflation data came out lower than expected, giving rise to concerns that the Federal Reserve may become more hesitant in its current monetary tightening cycle after having hiked interest rates in March.

On Thursday of last week, the US Producer Price Index (PPI) for March came out at -0.1% – the first negative reading since July 2016 – which fell below expectations that producer prices would remain unchanged. Additionally, the core PPI (excluding food and energy) also failed to meet expectations at 0.0% against forecasts for a 0.2% rise.

The PPI data was followed on Friday by even more disappointing Consumer Price Index (CPI) data for March, which showed a -0.3% drop versus expectations for no change in prices. This was the first negative monthly reading for headline consumer inflation in over a year. The core CPI (excluding food and energy) came out at -0.1%, the first negative reading in seven years, against forecasts for a 0.2% rise.

Along with the consumer and producer inflation data last week, US retail sales also disappointed expectations, leading to further pressure on the US dollar.

Meanwhile, geopolitical concerns have continued to take center stage as the Trump Administration nears the end of its first 100 days in office and struggles to deal with increasing global tensions. Most recently, late last week saw the US military drop the largest non-nuclear bomb that it has ever used in combat on targets in Afghanistan. And over the weekend, North Korea again conducted a failed missile test, prompting increasing worries that the renegade regime is becoming ever more aggressive in its aims to further extend its nuclear firepower.

These and other geopolitical risks and concerns have recently contributed to boosting safe haven assets like gold and the Japanese yen.

In the case of USD/JPY, the combination of a falling dollar and surging yen has pushed the currency pair down to approach major support around the key 108.00 level, extending the general downtrend that has been in place since the beginning of the year. This drop prompted USD/JPY to trade below its 200-day moving average last week for the first time since November of last year. With any further breakdown below 108.00 support, the next major downside target is around the key 105.50 support area.
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Featured Analysis

Learn Forex Trading