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USD/JPY extends losses toward 11.50 area on dismal US data

  • Philly Fed Manufacturing Index falls short of expectations in December.
  • Dollar weakens on disappointing data.
  • US 10-year T-bond yield extends slide in the early NA session.

After breaking below the 112 mark, the USD/JPY went into a consolidation phase but came under a renewed selling pressure in the early NA session to touch its lowest level since late October at 111.55. As of writing, the pair was down 0.8% on the day at 111.60.

The monthly report published by the Federal Reserve Bank of Philadelphia on Thursday showed that the business activity in the regional manufacturing sector expanded at a slower pace than expected with the headline diffusion index coming 9.4 in December to miss the market consensus of 15 by a wide margin. Furthermore, weekly initial jobless claims increased to 214K from 206K in the week ending December 14. As of writing, the US Dollar Index was down 0.6% on the day at 96.38.

On the other hand, falling 10-year T-bond yield following yesterday's FOMC announcements revived concerns over the yield curve inversion, which is widely considered as a good indicator of an economic slowdown, and boosted the demand for safe-havens on Thursday. At the moment, the 10-year yield is down 0.65% on the day at 2.758%.

Earlier in the day, the Bank of Japan left its monetary policy unchanged and Governor Kuroda said that Japan's economic fundamentals were solid and that the FX market was moving in a relatively stable manner.

Technical levels to consider

With a daily close below 111.60 (200-DMA), the pair could target 111.35 (Oct. 26 low) on the downside ahead of 111 (psychological level). On the upside, resistances align at 112.65 (daily high/100-DMA), 113 (20-DMA/50-DMA) and 113.65 (Dec. 14 high).

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