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The USD/JPY is gravitating towards the 144.70 level with notable losses.
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Soft PPI data for December weakened the US Dollar.
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Red Sea tensions may limit the downside for the pair.
In Friday’s trading session, USD/JPY faced a setback, currently trading near 144.70 with a loss of 0.40%. This downward movement is driven by a softer producer price index (PPI), but rising tensions in the Red Sea region could bring demand back to the US dollar.
On the data front, the US final demand producer price index (PPI) reported a 1% annual increase in December, up slightly from November’s revised increase of 0.8%, according to data from the Bureau of Labor Statistics on Friday. This reported percentage falls below the expected 1.3% market projection. The key measure came in at 1.9%, lower than the 1.9% expected.
That said, the U.S. economy shows an upward trend in overall inflation, with the Consumer Price Index (CPI) rising from 3.1% to 3.4% annually, indicating the possibility of higher interest rates if the Federal Reserve aims to rein it in, which could be the U.S. Limit any dollar losses. In addition, lower weekly jobless claims suggest stronger labor market conditions, which could favor dovish statements from banks.
Additionally, as tensions rise in the Red Sea between the US and Houthis rebels, markets fear potential escalation and may seek refuge in the Greenback, which could eventually push the pair upwards.
USD/JPY levels to watch
From the daily chart, the pair shows that the overall trend is bullish. This interpretation is derived from the position of simple moving averages (SMAs), where the pair is found below the 100-day SMA while staying above the 20-day and 200-day SMA, indicating that buying power resists bearish pullback attempts. .
Further, the Relative Strength Index (RSI) shows a negative dynamic, detailing that the pair is in a negative territory. For now, it highlights that possible bearish implications on the pair need to be monitored, although the overall momentum may still keep the bulls grounded.
Additionally, the Moving Average Convergence Divergence (MACD) indicates a potential shift towards bullish positions. Although the green bars are declining, they are still present, indicating that the buying momentum, although slowing, has not completely faded. However, if these bars continue to decline, it may indicate an increase in selling sentiment.
In summary, the technical landscape reflects neutral to slightly bearish conditions. Despite recent bearish movements, the buying sentiment still appears strong enough to challenge the selling momentum.
USD/JPY
