USDJPY Declines As War Retoric Builds, Support Moves to 154.00

Summary:
• The Russia-Ukraine war has subdued the dollar's upside against the yen and recent US economic data does not provide a strong fightback.

USDJPY dropped on Thursday, with the dollar losing 0.7 percent of its value to trade at 154.14 against the yen. The decline came as yields on benchmark 10-year US treasury bonds declined to 4.383, exerting pressure on the greenback. The USDJPY currency pair has been trading downwards in recent days, recording losses of 1.3 percent in the last five sessions.

Concerns over the impact of potential escalation of violence in the Russia-Ukraine war have limited the dollar’s upside, negating its safe haven appeal. The latest upturn in war rhetoric has for the first time raised the prospect of a direct confrontation between the United States and Russia, following the latter’s revision of its nuclear doctrine earlier this week.

Such a scenario does not sit well with investors and has sent the Dow Jones Index downward by 1.4 percent and the S&P Industrial Average down by 1.2 percent in the last five sessions. However, the dollar has support from the rising prospect of the Fed leaving interest rates unchanged in December.

As consumer inflation remains sticky, FOMC members, including Federal Reserve Chairman Jerome Powell, have been leaning more toward a slower easing of interest rates in their recent statements.

The dollar got some support on Thursday after US Initial Jobless Claims came out at 213k for the week ending November 14, against a forecast figure of 220k. However, the impact was neutered by a weakness in the Philadelphia Fed Manufacturing Index, which declined by -5.4 percent, far below the forecast growth rate of 7.4 percent. Japan will release its CPI and PMI figures later on Thursday, and that could inject fresh volatility into the USDJPY market ahead of Friday’s S&P Global PMI figures release.

USDJPY prediction

Pivot: USDJPY pivots at 154.15, and the RSI indicator favours the downside.

Support: Initial support is likely to be at 154.12. Extended downward momentum could test 154.10.

Resistance: The first barrier is likely to come at 154.17. Action above that level will invalidate the downside narrative and potentially take the pair higher to test 154.20.