Renewed Selling Pressure in USDJPY

The USD fell and safe havens surged, causing the USD/JPY forex pair to crash 4.5 cents lower early this month and the decline is resuming. Moving averages initially supported the price, but they are now being broken one after the other. Last week, the price found some support at the 50 SMA (yellow), but sellers quickly pushed it below this level.

USD/JPY Chart Daily – The 100 SMA Has Been Broken

Technical Indicators Signal Further Downtrend

The 100 SMA (green) also held as support on the daily chart on Thursday, and the USD/JPY made a respectable 2-cent bounce. However, sellers have returned, and they pushed the price below the 100 SMA yesterday, where it closed the day. If the USD/JPY closes below the Ichimoku cloud and below the 100 daily SMA on a daily basis, it is likely to continue losing ground. This might open the door for a more significant retreat since it would be yet another technical indicator using Ichimoku to validate the downtrend.

The stochastic indicator, which is pointing to the lows, and the pair’s decline during the period when the USD has been making a return, favor sellers. Following last week’s weaker-than-expected US CPI data, USD/JPY began its decline. Since then, there has been no fresh catalyst in terms of headlines as the pair is just being driven lower on the session, indicating a short squeeze on the extremely crowded long position. This is a welcome development for Japan after having intervened in the market on back-to-back days last week.

Japan Flash Manufacturing PMI for July

• Flash Manufacturing PMI (July): 49.2 points
  • Expected: 50.5 points
  • June Manufacturing PMI: 50.0 points
  • Explanation: The July Flash Manufacturing PMI dropped below the neutral 50-point mark for the first time, indicating contraction in the manufacturing sector. This decline is attributed to reduced output and new orders, while rising input costs have pressured profit margins. Input cost inflation has reached its highest level since April 2023, further straining manufacturers.
• Flash Services PMI (July): 53.9 points
  • June Services PMI: 49.4 points
  • The Flash Services PMI for July shows a significant improvement from June, moving into positive territory. This suggests that the services sector is experiencing robust growth, with stronger demand and business activity contributing to the increase.
• Composite PMI (July): 52.6 points
  • June Composite PMI: 49.7 points
  • The Composite PMI, which combines manufacturing and services sectors, rose substantially in July. This indicates overall economic expansion, driven by the strong performance of the services sector, despite the contraction in manufacturing.

USD/JPY Live Chart