The Japanese Yen was the top performer throughout the Thursday Asian trading session. It supported positive bias on US Dollar. The Yen is in the green for a third consecutive day. It’s doing so while successfully threading the needle through a market hurt by an even weaker USD. So far, traders are still playing it conservative. In fact, they’re holding back from taking big actions until some critical economic indicators are released later today.
Just as the USD/JPY tactily approaches 146.00 in the support zone, it has difficulty re-attracting buyers. Major market participants are particularly focused on the May 13 release of the US Producer Price Index (PPI). They are particularly looking forward to the expected remarks from Federal Reserve Chair Jerome Powell. Their hesitance in taking a strong position even above $5 indicates the overall lack of direction in the market, with traders still awaiting guidance from these key fundamental reports.
Generally, the USD/JPY pair hasn’t been able to maintain its bullish strength. Following a bounce, it failed to reclaim the 23.6% Fibonacci retracement of its advance from the year-to-date low in April. From the 2021 USD bull market output recent price action indicates that new USD selling pressure has developed. This dramatic drop is a prime factor for the Yen’s continued strength.
As positive as its present tone is, the analysts cautioned that continued strength above 75.00 may trigger an intraday short-covering rally. Should this be the case, the USD/JPY pair would likely rocket towards the 147.70 intermediate obstacle. This move is potentially paving the way for a future advance to test the 148.00 key psychological figure. On the upside, strong resistance is expected in the 148.25-148.30 area. Traders could have a tricky time smashing by way of this massive hurdle.
Further technical indicators point to weakness in the USD/JPY advance. That still leaves that 200-period Simple Moving Average (SMA) resistance breakpoint on the 4-hour chart as a big deal pivot point for traders. Hourly charts show a sea of red on oscillators such as %R, MACD and Stochastics. Hence, the USD/JPY currency pair could depreciate significantly.
Market sentiment shows traders are worried about a possible fall under the 146.00 level. Should that come to pass, it would bring on a likely retest of former lows nearer 145.60 or even a return to the weekly low on Wednesday. Analysts pegged the 146.60 level as the initial resistance. This level coincides with the 23.6% Fibonacci, making this a key line in the sand before the 147.00 psychological round number.
On the support side, the area to keep an eye on for traders comes in the 145.35-145.30 area. A drop below this support may pave the way for deeper losses toward the psychologically important 145.00 level.
This morning, Japan announced record levels of wholesale inflation. This is a sign that businesses are still able to pass along mounting costs to their customers. For one, this trend has played a big role in heightening fears about durable inflationary pressures in Japan’s economy, thus shaping the overall market narrative.