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US Dollar Under Pressure as Treasury Yields Ease Ahead of US CPI. Where to for USD/JPY?

US Dollar Under Pressure as Treasury Yields Ease Ahead of US CPI. Where to for USD/JPY?

Daniel McCarthy, Strategist

US Dollar, USD/JPY, Yen, Crude Oil, Gold, China, CPI, PPI, BTC, FTX - Talking Points

  • The US Dollar is struggling to gain traction as Treasury yields ease
  • China woes are questioning global economic growth amid soft inflation data
  • The Fed and the market eye tomorrow’s US CPI. Will it rescue USD/JPY?

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The US Dollar continues to languish after yesterday’s slide lower as midterm election results roll in. Treasury yields dipped lower through the North American session with the benchmark 10-year note near 4.14%

This is ahead of crucial US CPI data that is due out tomorrow and can be followed live on the DailyFX calendar.

USD/JPY is eyeing a move below 145.00 but currency markets have been quiet through the Asian session. The Japanese government announced a second supplementary budget today with a number of additional fiscal stimulus measures.

Gold continues to trade above US$ 1,700 on the weaker US Dollar.

Wall Street finished in the green, but APAC equities have been sluggish with Chinese markets leading the way lower after another increase in Covid-19 cases. They are at the highest level in six months, and this dragged crude oil lower on concerns about the global growth outlook.

China’s inflation data revealed another month of cooling in price pressures there through October. Year-on-year CPI to the end of last month came in lower than expected at 2.1%, instead of 2.4% and 2.8% previously.

PPI over the same period saw a similar result, printing at -1.3% rather than -1.5% anticipated and 0.9% prior.

The Yuan dipped lower, with the offshore USD/CNH rate nudging above 7.2600 before retreating back toward 7.2500.

Bitcoin collapsed to its lowest level in 2-years in the aftermath of FTX being swallowed up by Binance.

It has been reported that there had been a liquidity crunch for FTX where there had been a run on their FTT token. Other cryptocurrencies and related stocks have been impacted by the news.

Looking ahead, there is some second and third tier data from both Europe and North America as well as several central bank speakers that will be crossing the wires.

The full economic calendar can be viewed here.

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USD/JPY TECHNICAL ANALYSIS

USD/JPY has been eyeing the recent low of 145.10 today after moving below the breakpoint at 145.47, which was established from the low in the aftermath of the Bank of Japan’s intervention.

Further down, support could be at the break points and previous lows at 143.53, 141.50, 140.35 and 139.39. Support may also be at an ascending trend line and the 100-day simple moving average (SMA) in the 140.30 – 140.40 area.

Nearby resistance might be at the prior peaks at 148.85 and 151.95.

154.88 may offer resistance as it is the 161.8% Fibonacci Extension of the mid-September pullback from 145.90 to 140.35. Another potential resistance is at 155.95, representing the Fibonacci Extension level of the move from 151.95 to 145.47.

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Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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