USD/JPY breaks below 111.00 as mounting pressures weigh on the greenback

  • Falling US bond yields benefits the Japanese yen.
  • Fears of higher inflation and a struggling labor market surround the American economy.
  • US ISM Manufacturing PMI was better than expected.

The USD/JPY is losing for the second day in a row, down 0.31% is trading at 110.95 during the New York session at the time of writing.

Pressure is weighing on the US Dollar. Fears of rising prices, worse than expected employment data, and a hesitant Fed Chairman Jerome Powell divided between attacking inflation or achieve progress in employment dampen the market sentiment. Further, US political uncertainties around the debt-ceiling and the infrastructure spending bill do their part exerting downward pressure on the USD/JPY pair.

The US 10-year bond yield is down almost four basis points, sits at 1.489%, falling for the second consecutive day. Meanwhile, the US Dollar Index, which tracks the greenback’s performance against six peers, is down 0.21%, currently at 94.05, as we approach the weekend.

US ISM Manufacturing PMI expanded the most in four months

Meanwhile, the US ISM Manufacturing PMI for September increased to 61.1, better than the 59.6 expected by analysts. The growing demand for factory goods boosted the reading. In the meantime, the University of Michigan Consumer Confidence edged higher to 72.8 more than 71 foreseen. Even though it remained near pandemic lows, Americans are slightly more optimistic about current economic conditions.

Regarding the favorite Fed’s reading for inflation, the Personal Consumption Expenditure Index for August increased by 4.3% on a year-over-year basis, a tenth higher of the expectations. It is the higher increase since 1991.

USD/JPY Price Forecast: Technical outlook

In the daily chart, the USD/JPY is approaching the last Friday’s close around 110.73, so for buyers or sellers, it is crucial to watch for it. A daily close below the latter could exert downward pressure on the pair. The first support on its way down would be August’s 11 low at 110.44, followed by the confluence of the 50 and the 100-day moving average around 110.10.

On the flip side, a daily close above 110.73, the first resistance would be the psychological 111.00 level. A sustained breach above could expose key resistance levels, the July 2 high at 111.65 and then 112.00

The Relative Strength Index is at 58, bounced off oversold levels, and is slightly lower but above the 50-midline, supporting the bullish bias.