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USD/JPY may continue to slide as traders turn to Chinese PMI data amid risk-off move

JPY, USD/JPY, Market Sentiment, China PMI, Technical Outlook – Talking Points

  • Asia Pacific markets may follow the tone of Wall Street’s risk aversion in overnight trading
  • China’s March PMI data may influence market sentiment
  • USD/JPY technical indicators point to further weakness in the short term after multi-day decline

Asia Pacific forecast Thursday

The Japanese yen rose against the US dollar and the Australian dollar overnight as traders switched to a risk-averse stance on Wall Street. The high-tech Nasdaq-100 Index (NDX) lost 1.10%, reversing the previous day’s gains. US dollar DXY fell to overnight lows as bond yields fell amid Treasury safe-haven outflows. Buying was fiercer on the longer end of the curve, pushing the 2Y/10Y yield spread higher, negating some of the concerns raised by this week’s yield curve inversion.

Oil prices soared, with West Texas Intermediate crude prices outpacing the uptick in prices for Brent, the globally priced benchmark. The Energy Information Administration’s weekly oil situation report showed a decline of 3.45 million barrels for the week ending March 25. This was a larger drop than the 1 million barrels analysts had expected. The Above the average number of exports in the previous week It may have played a role in this massive stock pullback.

This morning, South Korea released several economic data for the February period. Industrial production rose 6.2% on an annual basis in February, up from 4.2%, while industrial production rose 6.5%, topping analysts’ expectations of 4.5%. Japan is due to release its industrial production data for February, with analysts expecting the February reading to rise 0.5% month over month. The recent strength of the Japanese yen may pressure the Japanese Nikkei 225 index today.

The Australian dollar will be highlighted later today. China’s National Bureau of Statistics (NBS) is set to release PMIs for the manufacturing and services sectors. Bloomberg estimates that manufacturing activity fell to 49.8 for the month of March. This would put the manufacturing sector in China into a recession. A larger-than-expected decline may boost risk aversion in today’s trading session.

Technical forecast for the USD/JPY pair

The Japanese yen rose for a second day against the US dollar, pushing the USD/JPY to a 2016 high of 121.689 on a daily basis. Prices are trading just above that level this morning. The rise of the 12-day exponential moving average (SMA) and the 20-day simple moving average (SMA) may provide support if prices break below the level and continue lower. The Relative Strength Index (RSI) has crossed back to the neutral zone below the 70 mark, which can be interpreted as a sell signal. Moreover, the MACD oscillator is looking at the correct track for a bearish signal line crossover. Alternatively, the 2022 high is the most likely point of resistance if prices reverse upwards.

USD/JPY daily chart

The graph was created using TradingView

— By Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or Tweet embed on Twitter

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