USD/JPY extends slide to 113.75, still heads for weekly gain

• Limited gains in equity markets and lower US yields boost Japanese yen across the board.
• US dollar retreats on American hours, DXY turns negative.
• USD/JPY erases gains, back into the previous range around 114.00.

The USD/JPY retreated further during Friday’s American session and dropped to 113.75, hitting a two day low. Earlier on the day, the pair climbed to 114.29, hitting the highest level in almost two weeks.

The combination of lower US yields, caution across equity markets and mixed economic data from the US strengthened the Japanese yen on Friday. The US dollar lost momentum near the end of the week. The DXY is falling after a strong two-day rally. It hit a fresh multi-month high and the 95.26 and then pulled back toward 95.10.

Economic data released on Friday showed the Consumer Confidence index, measured by University of Michigan, dropped from 71.7 to 66.8, against expectations of an increase to 72.4. US yields bottomed after the report with the 10-year falling to 1.54%.

The outlook for USD/JPY continues to point to a consolidation after the sharp rebound from 112.70 back above 113.40. It is back to the previous range around 114.00. A daily close above 114.40 should point to more gains, while under 113.30,  a test of the monthly lows seems likely.

Technical levels