USDJPY is showing signs of a potential reversal lower here. Price recently failed once again at a test of the 109.63 level and is now starting to break below the rising channel from last year’s lows. With the MACD and RSI indicator turning bearish here, there is room for a push lower towards the 107.91 level firstly and the 106.97 level thereafter.
JPY has been back in demand recently amidst softer risk appetite at the start of the week. While risk assets have broadly recovered into the end of the week, rising inflation expectations looks likely to create further headwinds for risk assets going forward. Meanwhile, with the US Dollar continuing to trade lower, there is room for JPY to continue to advance in the near term.
Key Data to Watch
US PMI readings later today will be the final key economic releases to watch. Both services and manufacturing are forecast to have declined over the prior month. If this is confirmed, USDJPY is likely to move lower over the day. On the other hand, if data comes in above expectations this could see USDJPY catching a bid.
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