USD/JPY erases daily gains as DXY pushes below 93

25 November 2017, 13:28
Tamas Molnar
  • USD remains under pressure despite thin trading volume.
  • 100-DMA and 200-DMA levels form a strong resistance for USD/JPY.
  • Markit PMI data from the U.S. is awaited.

After rising toward mid-111s, the USD/JPY pair came under pressure in the last hour and erased the majority of its daily gains. As of writing, the pair was trading at 111.35, up only 10 pips on the day.

DXY drives the pair's price action

Following Wednesday's FOMC-inspired sharp drop, the USD/JPY pair traded in a very tight range on Thursday with the Thanksgiving holiday in the U.S. keeping the volume low. Although the market volatility didn't show a meaningful rise on Friday, the greenback continued to extend its losses against its peers. The US Dollar Indexfailed to hold above the 93 mark and fell to its lowest level since October 13 at 93.80. At the moment, the index is at 92.82, losing 0.25% on the day.

Later in the session, Markit is going to release its PMI data for the manufacturing and the service sector in the U.S. In case the data beat the investors' expectations, the greenback could take advantage of the data and try to correct its recent losses. Nonetheless, the pair is likely to close the third week in a row lower. Since the start of the month, the pair lost nearly 250 pips.

Technical outlook

The former support at 111.50, where the 100-DMA and 200-DMA levels are located, is now a critical resistance. Only a decisive break above that area could allow the pair to extend its corrective rise, encountering next resistance levels at 112 (psychological level) and 112.70 (Nov. 21 high). On the downside, supports could be seen at 111.05/00 (Nov. 23 low/Sep. 17 low) ahead of 110 (psychological level) and 109.30 (Sep. 12 low). 

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