USD/JPY rally loses momentum near the 135.00 mark
The USDJPY pair encountered selling pressure after touching monthly highs above the 135.00 barrier on April 19. After an initial rally, the USD/JPY pair loses its bullish momentum and retreats from its recent highs, encountering selling pressure near the 135.00 level. The pair failed to extend its upside momentum as the US dollar faced renewed selling pressure, pushing the USD index (DXY) below the 102.00 mark. The daily decline in the spot also coincided with the correction in US yields across the curve, contributing to the bearish sentiment in the USD/JPY pair.
Weaker US dollar and declining yields weigh on USD/JPY
The selling pressure in the US dollar was mainly due to the correction in US yields, which fell across the curve. Moreover, the USD Index (DXY) gave up earlier gains, further exacerbating the bearish sentiment in the USD/JPY pair. As the greenback weakened, the yen strengthened, leading to a decline in the USD/JPY pair.
Japanese economic indicators show mixed results
The Japanese docket released several economic indicators that provided mixed signals to the forex market. The trade deficit in March decreased to ¥754.5B, while foreign bond investment rose to ¥500.2B in the week ending April 15. Additionally, the Tertiary Industry Index rose 0.7% MoM in February, indicating a positive trend in the Japanese economy.
US economic indicators disappoint
On the other hand, the US economic indicators released were disappointing, with the Initial Claims going up by 245K in the week ending April 15, and the Philly Fed Index worsening to -31.3 for the current month. These indicators contributed to the bearish sentiment in the US dollar, which ultimately impacted the USD/JPY pair's performance in the forex market.
USD/JPY levels to watch
As of writing, the USD/JPY pair was down by 0.28% at 134.29, facing immediate support at 132.01 (low on April 13), followed by 130.62 (monthly low on April 5), and 129.63 (monthly low on March 24). If the pair manages to surpass the 135.13 level (monthly high on April 19), the next resistance levels to watch out for would be 137.07 (200-day SMA) and 137.91 (2023 high on March 8).
Why Forex Traders Need to Stay Informed
The USD/JPY pair is one of the most actively traded pairs in the forex market, and its price action is significantly influenced by economic indicators, monetary policies, and political events in the US and Japan. As such, forex traders need to monitor the economic data releases and central bank announcements carefully to identify potential trading opportunities in the USD/JPY pair. Moreover, the performance of the USD/JPY pair can also impact other currencies' performance, particularly those that are correlated with the US dollar or the Japanese yen. Therefore, forex traders must stay up-to-date with the latest news and developments that can impact the USD/JPY pair's performance in the forex market.