USD/JPY tumbles to three-week lows near 113.50

• Japanese yen benefits amid weak US data and risk aversion.
• DXY erases losses and turns positive during the American session.
• USD/JPY has the biggest weekly loss in a year.

The USD/JPY extended weekly losses and tumbled to 113.47, reaching the lowest level since December 20. It then rebounded, rising toward 113.80. The dollar is having the worst weekly performance versus the yen in a years.

Another day, another loss

On Friday, USD/JPY is falling for the third consecutive day and for the sixth time out of the last seven trading days. The last intraday leg lower came in after the US Retail Sales report that showed an unexpected decline of 1.9% in December. A different report showed Industrial Production dropped 0.1% in December against expectations of a 0.4% increase. Also, Consumer Confidence data came in worst-than-expected.

The figures contributed to the deterioration in market sentiment that is helping the yen. The Dow Jones is falling 0.70% and the Nasdaq 0.15%. In Europe, mains stock indices closed in red.

USD/JPY week ahead

The loss of 115.00 on Wednesday and 114.00 on Friday places the remainder of the USD/JPY gains since early December in question and opens the region to 112.00 and 111.00, warns Joseph Trevisani, Senior Analyst at FXStreet.  “There is reasonable technical support down to 113.00, but the area beneath to 112.00 was traversed in just two trading sessions in early October and is quite vulnerable.” 

Trevisani points out that the Bank of Japan meeting on Tuesday will produce no policy changes in the week ahead, and if the bank reveals a new economic support package, it will have little market impact. “National CPI for December will not alter the BOJ’s view of inflation.”

US economic data includes housing market numbers with Existing Home Sales, Building Permits and Housing Starts for December, “interesting statistics but not market movers.”

Technical levels