The USDJPY currency pair, currently at 138.343, has discovered a temporary support level around 138.50. However, there is anticipated further decline in the pair due to a significant decrease in US Producer Price Index (PPI).

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• USD/JPY has found an intermediate cushion near 138.50. More downside is expected as US PPI has softened significantly.

The pair currently trades last at 138.343.

The previous day high was 140.39 while the previous day low was 138.16. The daily 38.2% Fib levels comes at 139.01, expected to provide resistance. Similarly, the daily 61.8% fib level is at 139.54, expected to provide resistance.

The USD/JPY pair has gauged intermediate support near 138.50 in the early European session. The asset has attempted a recovery move after building a base around 138.50, however, more downside seems favored as the United States Producer Price Index (PPI) has softened more than expected.

The monthly headline and core PPI expanded by 0.1% but at a slower pace than expected by the market participants at 0.2%. On an annualized basis, headline prices at factory gates have decelerated dramatically to 0.1% vs. the consensus of 0.4% and the former release of 0.9%. Additionally, core PPI has softened to 2.4% against the estimates of 2.65 and the prior release of 2.8%.

After the soft inflation report, a significant decline in factory gate prices indicates that price pressures are declining broadly. Also, households’ demand has dropped sharply which has forced producers to grip retail prices.

The pace of softening in inflation and the PPI report is going to encourage the Federal Reserve (Fed) to skip the policy-tightening spell for the second time.

Apart from the PPI report, weekly Initial Jobless Claims have also been released for the week ending July 07. The US Department of Labor has reported that first-time claimers were 237K vs. expectations of 250K and the former release of 249K.

S&P500 is expected to open on a bullish note, considering positive gains made in the overnight session. US equities have remained firm as soft inflation has trimmed fears of a recession significantly. The US Dollar Index (DXY) has continued its decline to near 100.15.

On the Japanese Yen front, Japan’s top currency diplomat Masato Kanda cited that deflationary norms may be changing. Kanda added the government is closely watching FX market moves.

Technical Levels: Supports and Resistances

USDJPY currently trading at 138.48 at the time of writing. Pair opened at 138.5 and is trading with a change of -0.01 % .

The pair is trading below its 20 Daily moving average @ 142.79, below its 50 Daily moving average @ 139.99 , above its 100 Daily moving average @ 136.96 and above its 200 Daily moving average @ 137.16

The previous day high was 140.39 while the previous day low was 138.16. The daily 38.2% Fib levels comes at 139.01, expected to provide resistance. Similarly, the daily 61.8% fib level is at 139.54, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 137.64, 136.78, 135.4
• Pivot resistance is noted at 139.88, 141.25, 142.11

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