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USD/JPY remains in red near mid-113s as US stocks falter

  • DXY remains under pressure below the 94 handle.
  • US stocks start the day in the red and extend losses.
  • Falling US T-bond yields weigh on the greenback.

The USD/JPY plummeted to a daily low at 113.30 on during the first half of the NS session on Tuesday before making a modest recovery. As of writing, the pair was trading at 113.53, losing 0.1% on the day.

JPY takes advantage of weak market sentiment

Major equity indexes in the U.S. started the day lower on Tuesday and failed to retrace its losses as falling crude oil prices and a heavy sell-off in GE shares for the second straight day weighed on the energy sector. At the moment, both the Dow Jones Industrial Average and the S&P 500 indexes are losing 0.2%. In the meantime, following yesterday's consolidation, the 10-year US T-bond yield lost traction and was last seen down 0.75% on the day.

The JPY as a traditional safe-haven found demand as the risk appetite remained low on the day. Additionally, a broad-based sell-off seen in the greenback pulled the pair even lower. The US Dollar Index, which had been able to hold above the 94 handle since late October, dropped 93.85 in the session. At the time of writing, the DXY was down 0.5% on the day at 93.90. Today's upbeat PPI data from the U.S. failed to help the index retrace its losses amid some dovish comments from the Fed's Bullard.

  • Fed's Bullard: Current interest rate level likely to remain appropriate over near-term
  • US: PPI for final demand rises 0.4% in October

In the early trading hours of the Asian session on Wednesday, the GDP growth data from Japan could be the next catalyst for the pair. Markets expect the annual GDP growth to improve to 0.1% from -0.4% on a yearly basis in the third quarter. A higher-than-expected reading should be able to provide an additional boost to the JPY.

Technical outlook

Despite today's retreat, the pair continues to trade in its three-week-old range and struggles to make a decisive move in either direction. The first technical support for the pair could be seen at 113 (psychological level/50-DMA), 112.10 (Oct. 18 low) and 111.45 (100-DMA/200-DMA). On the upside, resistances could be seen at 113.75 (20-DMA), 114.35 (Nov. 7 high) and 114 (psychological level).

  • USD/JPY risks a test of 112.18/111.77 – Commerzbank

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