The US Dollar Index has come under pressure this week, with the yen emerging as one of the strongest performers across FX market. From a technical perspective, the USD/JPY chart is starting to show a few bearish signs again after being neutral for much of the summer, writes Fawad Razaqzada, technical analyst at Trading Candles.
The latest leg lower in USD has been fueled in part by falling US bond yields and the US government shutdown, which is keeping the dollar under pressure across the board. Markets are now weighing the prospect of an extended stalemate, which could sap consumer confidence and deepen concerns over job security.
The Japanese yen appears to be the primary beneficiary of the latest government shutdown which officially began Wednesday, and hopes of a quick resolution appear slim. The USD/JPY has dropped to the 147 handle. The yen is quietly gaining across the board, too. The GBP/JPY, for example, slipped to 198 after failing to hold the psychological 200 level.
Overall, the USD/JPY pair has been choppy for months — flat in June, higher in July, lower in August, and then bouncing in early September. In the last few days, however, sellers have regained the upper hand, threatening to end a four-week winning streak.
The key level to watch is 147.50, which has now been taken out. A break below here has already sparked a wave of stop-loss selling, with the first objective of 147 now being met. Should the pair now hold below 147.50, then this could potentially open the path towards 146.30, 146, and possibly 145 in the near-term.
