USD JPY drops to key 108 00 target new 17 month low

USD/JPY extended its recent plunge on Thursday, falling well below the 110.00 psychological level to hit its next major downside support target at 108.00. In the process, the currency pair has established a new 17-month low.

USD/JPY’s sharp fall within the past week-and-a-half has been primarily because of weakness in the US dollar due to ongoing caution on the part of the Federal Reserve in hiking interest rates further, along with skepticism with regard to the Bank of Japan’s effectiveness in intervening to weaken the yen.

Wednesday’s release of meeting minutes from last month’s FOMC meeting indicated debate among Fed members regarding the conditions for another rate hike, but clearly highlighted the group’s persistent concern over weak economic growth and inflation, which would pose a major obstacle to raising interest rates further. The Fed’s continuing dovish stance on monetary policy have placed increasing pressure on the US dollar as of late.

Although the surging yen has raised speculation that the Bank of Japan may soon intervene to weaken its currency, skepticism remains over the efficacy of the central bank’s attempts to do so, especially in light of its recent easing into negative interest rate territory, which had no lasting impact on restraining yen appreciation.

From a technical perspective, USD/JPY has broken down below several important support factors in the past week-and-a-half. After retreating from both its 50-day moving average and the upper border of a large descending triangle pattern, the currency pair broke down below major support at 111.00 earlier this week. After doing so, USD/JPY quickly followed-through by dropping down to key psychological support at 110.00. Then, as previously noted, price action plunged further on Thursday to hit the major support target at 108.00. In the absence of a successful attempt by the Bank of Japan to intervene in the strong yen, a weakening dollar could push USD/JPY lower in the short-term. In the event of a sustained breakdown below the 108.00 level, the next major downside target is at the 105.00 support level.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.