USDJPY still looking for support, drops more than 5% in two days

• US dollar extends losses on Friday, even as stocks decline.
• Japanese yen is among the best performers of the day and the week.  
• USDJPY heads for a weekly loss of near 900 pips.

The USDJPY is testing levels under 139.00 during Friday’s American session, holding onto significant weekly losses. During the last two days, the pair dropped more than 700 pips.

The October US CPI triggered sharp market moves that favored the yen. On Friday, the USDJPY rose to 142.40/50 only to turn to the downside again breaking under 140.00.

Terrible week for USD, outlook still negative

The collapse of the Dollar and lower US yields sent the USDJPY down during the week from 147.15 to levels under 139.00, falling almost 6% on the worst week in years. The pair is back at August levels and clearly below the 20-week Simple Moving Average for the first time since January 2021.

The DXY is extending weekly losses late on Friday as it drops 1.12%, to 106.70, the lowest since mid-August. Not even a decline in equity prices, nor a bad reading in US Consumer Sentiment is helping the Dollar.

Next week, attention will continue to be on the USD’s trend. Economic data in the US includes the Producer Price Index on Tuesday and Retail Sales on Wednesday. In Japan, the National CPI will be released Friday with an increase expected from 3.0% to 3.7%. “In a sign that inflation is becoming more broad-based, core ex-energy is expected at 2.4% y/y vs. 1.8% in September.  Yet the BOJ shows no signs of pivoting under Governor Kuroda.  The next policy meeting is December 19-20 and no change is expected then”, said analysts at Brown Brothers Harriman.

Technical levels