USD/JPY consolidates under 114.00, heads for lowest close in a month
21.01.2022, 16:16

USD/JPY consolidates under 114.00, heads for lowest close in a month

  • US dollar posts mixt results on Friday ahead of Fed’s week.
  • Risk aversion and lower US yields weigh on USD/JPY.
  • Pair drops for the second week in a row, next support at 113.50.

After a short-lived recovery, the USD/JPY resumed the downside and dropped to 113.59, reaching a fresh one-week low. It is hovering around 113.70, consolidating weekly losses and on its way to the lowest daily close in a month.

USD/JPY extends slide despite Fed’s expected hikes

The combination of risk aversion across financial markets and lower US yields weighed on the USD/JPY during the week. Momentarily it traded above 115.00 on Tuesday, and then resumed the downside.

If the slide continues, the next key level for USD/JPY is the 113.50 area (last week lows) and then 113.20. The negative momentum for the US dollar could be alleviate with a firm recovery above 114.70.

The key event next week is the FOMC meeting. No change in interest rate is expected on Wednesday but a clear sign of a March hike is seen. “A likely March rate hike has been well communicated, so a "prepare for liftoff" signal will not be market-moving. More important will be guidance on QT as well as the funds rate after March. We don’t expect definitive signals, unfortunately; the next dot plot update is in March. The result could be mixed messages”, warn analysts at TD Securities.

Technical levels

 

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