USD/JPY eyes further downside past 139.00 despite Thanksgiving-led inaction

• USD/JPY remains pressured around weekly low, down for the third consecutive day.
• Mixed data from Japan, absence of bond traders failed to stop bears amid broad-based US Dollar weakness.
• Concerns surrounding Fed’s next move, China underpin cautious optimism, weigh on the USD.

USD/JPY holds lower ground near the weekly bottom surrounding 138.60 during the initial hour of Thursday’s European session. In doing so, the Yen pair prints a three-day losing streak amid broad US Dollar weakness while ignoring mixed numbers from Tokyo.

Japan’s manufacturing activity shrunk at the fastest pace in two years in November while the activity of the services industry also eased. That said, Japan’s Jibun Bank Manufacturing PMI dropped to 49.4 versus 50.7 prior release and forecasts. Further, the Services counterpart flashed the 50.00 figure compared to 53.1 expected and 53.2 previous readings.

Additionally, Japan’s Coincident Index rose past 101.1 market forecasts to 101.4, versus an upwardly revised 101.8 prior, whereas the Leading Economic Index came in as 97.5 compared to 97.4 expectations and 101.30 previous figures.

That said, easing fears of the US Federal Reserve’s (Fed) aggressive rate hikes, especially after the previous day’s Federal Open Market Committee (FOMC) Meeting Minutes, keeps the USD/JPY hopeful. On the same line are the hopes for Chinese government stimulus and a cut to the People’s Bank of China’s (PBOC) Reserve Requirement Ratio (RRR), as well as hopes of quick recovery from the COVID-19-led grim economic conditions.

It should be noted that the S&P 500 Futures join firmer Asia-Pacific shares to print mild gains and weigh on the US Dollar but the Treasury yields are inactive amid the Thanksgiving holiday. Further, the US Dollar Index (DXY) remains pressured towards the monthly low near 105.35, around the weekly low of 105.63 by the press time.

Moving on, a lack of major data/events and holiday mood in the US might challenge the USD/JPY bears. Even so, headlines surrounding China and Japan could entertain the Yen pair traders.

Technical analysis

A U-turn from the 38.2% Fibonacci retracement level of the May-October upside, a clear downside break of the 100-DMA and bearish MACD signals favor USD/JPY bears.

Also read: USD/JPY Price Analysis: Bears approach 138.40 key support