The Japanese Yen is under negative pressure after the economy’s producer price index for April came in stronger than expected. The Japanese PPI grew by 0.2% versus the expected decline to 0%, fuelling the bets that the Bank of Japan (BoJ) will continue its ultra-loose monetary policy, weakening the Yen in the process.
However, the fears of a potential default from the US could continue to weigh on the US dollar and offer resistance to the USDJPY’s rally in the short term.
The 4H chart shows that the Gopher recently pulled back within the ascending channel following the bulls’ failure to sustain a break out of the channel. With the pair recently breaking above the 23.60% Fibonacci retracement level, the bulls could hope to maintain the break as they look to target a break out of the channel. A break out of the channel would bring the 137.076 and the major resistance level at 137.076 into play.
However, a possibility exist for price action’s failure to sustain a move above the 23.60% Fibonacci retracement level as the debt ceiling bets continue to weigh on the greenback. Thus, a possibility exists for a price action pullback within the range created by the 23.60% Fibonacci retracement level at 135.867 and the 50% Fibonacci retracement level at 133.714. After that, the bears would keep a keen eye on the 133.714 price level for a potential move to the lower levels.
With the Japanese PPI weighing on the Japanese Yen, investors’ focus will now firmly shift to the US, with multiple Fed members delivering their speeches during the day. Thus, should the price action fail to sustain a break above the upper trendline of the channel, a potential exists for a pullback towards the 135.867 and 133.714 trading range.
Sources: TradingView, Reuters, Trading Economics.
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