Three Black Crows, Selling Bias Dominates
The USD/JPY was closed at 109.99 after placing a high of 110.71 and a low of 109.93. After rising for three consecutive sessions, USD/JPY declined on Wednesday amid the recent decline in the U.S. dollar. The U.S. dollar was weak during Wednesday's trading session as the DXY reached 92.35 level after the Federal Reserve Chairman dismissed the concerns about starting tapering of asset purchases sooner than expected. In his testimony before Congress, Powell stated that the Fed would continue to provide its monetary support to the economy despite higher inflation readings last month.
Powell added that the spike in inflation was transitory as the rising consumer prices were due to increased demand from the reopening of the economy. He said that inflation would likely continue to grow in the coming months. The central bank will continue providing support as the economy has not reached the targeted levels set by the central bank for tapering asset purchases.
On the data front, at 09:30 GMT, the Revised Industrial Production for May declined by -6.5% against the expected -5.9% and weighed on the Japanese Yen that further caped loss in USD/JPY pair. From the U.S. side, at 17:30 GMT, the Producer Price Index for June rose to 1.0% against the estimated 0.6% and supported the U.S. dollar that further caped loss in USD/JPY. The Core PPI from June also surged to 1.0% against the predicted 0.5% and helped the U.S. dollar limit the downward momentum in USD/JPY.
Despite better than expected macroeconomic readings from the U.S. side, the U.S. dollar remained under pressure. It kept the USD/JPY pair depressed throughout the day as the dovish comments from Jerome Powell weighed on the greenback. Fed's concerns might start tapering soon were dismissed, and the greenback fell against its rival currencies.
Meanwhile, in its annual defense white paper, Japan said that growing military tensions around Taiwan and the economic and technological rivalry between China and the United States were threatening the peace and stability in East Asia as the regional power balance was shifting in favor of Beijing.
The paper revealed that it was necessary to pay close attention to the situation with a sense of crisis. The report said about the US-China tussle that the competition in technological fields was likely to become more intense in particular. The defense review was approved by the government of Prime Minister Yoshihide Suga on Tuesday and pointed to China as a primary national security concern of Japan. This added in the risk-off market sentiment that added further loss in the USD/JPY pair.
USD/JPY Intraday Technical Levels
Support Resistance
109.71 110.49
109.43 110.99
108.94 111.27
Pivot Point: 110.21
USD/JPY - Technical Outlook
The safe-haven currency pair USD/JPY is trading with a strong selling bias at 109.750 level, disrupting the support area of 110.023 level. On the 4 hour timeframe, the pair has closed three black crows pattern that demonstrates strong selling bias among investors. Besides, the USD/JPY has also violated the upward channel on the 4-hour timeframe, driving a solid selling trend in the USD/JPY pair. On the downside, the USD/JPY pair is exposed towards the next support level of 109.520 level, and the breakout of this level exposes it towards the support level of 108.940. Traders will be closely monitoring the U.S. Jobless claims and Fed Chair Powell Testimony as both of these events have the potential to drive price action. All the best!
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