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USD/JPY Extends Losses After Key Break of Support

FOREX
  • JPY is the strongest currency in G10 for a second session, with USD/JPY extending the break lower after yesterday's support at 129.52 gave way. The move has hastened the swift formation of a death cross (50-dma < 200-dma) for the first time since 2020.
  • This sequence highlights the clear downtrend, making further weakness likely. The focus going forward is on 127.53, the May 31, 2022 low. Significantly, this week's downtick is yet to trigger any technically oversold signals, with the 14-day RSI holding above levels that would suggest momentum has gone too far.
  • The greenback is moderately weaker as markets continue to react to yesterday's CPI print, with Fed hike expectations for February waning further. Around 5 bps of tightening has been knocked off market pricing after yesterday's release, helping keep the USD Index on the backfoot.
  • UK GDP data came in ahead of expectations for November, with activity around the World Cup helping boost growth. The surprise growth in the month works against expectations of an imminent recession in the UK, and has helped GBP/USD recover well off the post-CPI lows on Thursday.
  • Focus turns to the imminent beginning of earnings season, with banks and financials starting proceedings today. Reports are due from Bank of America, BNY Mellon, Blackrock, Citigroup, JPMorgan and Wells Fargo, among others.
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