USD/JPY refreshes 2-week lows on USD sell-off

After reaching its daily high at 111.22 in the late Asian session, the USD/JPY pair failed to preserve and extend its gains as the greenback stayed under a constant selling pressure. As of writing, the pair was trading at 110.66, losing 0.15% on the day.

Although there was no clear catalyst behind the recent sell-off, investors seem to be looking for excuses to get rid of their US dollars. A recent data showed that the Chicago Purchasing Managers' Index eased to 55.2 in May from 58.2 in April, pushing the US Dollar Index below the 97 handle for the first time this week. As of writing, the DXY was at 96.95, losing 0.28%. The NA session won't be offering any other macro data that could potentially impact the price action. However, Fed's Beige Book, which is a summary of economic conditions, scheduled to be released at 18 GMT could shed light on the rate hike expectations.

Furthermore, after a mixed start to the day, the major equity indexes in the U.S. started to fall, suggesting that the low-risk appetite is also supporting the demand for the JPY. At the moment, the Dow Jones Industrial Average was down 0.17% and the S&P 500 was losing 0.2%. 

• US stocks turn sharply lower after dismal US data

Earlier in the session, Dallas Fed President Robert Kaplan crossed the wires, arguing that three hikes in 2017 would be the best case scenario and the economy was not showing any signs of overheating as the inflation remains subdued. 

Technical levels to consider

On the upside, 111.53 (200-DMA) is the initial hurdle ahead of the critical resistance 112 (psychological level/Fibo 50% retracement of April-May uptrend/100-DMA) and 112.90 (Fibo 23.6% retracement of the same move). To the downside, with a decisive break below 110.50 (Fibo 23.6% retracement of the same move) the pair could aim for 110 (psychological level) and 109.60 (Apr. 24 low). The RSI on the daily graph continues to move lower towards the 30 handle, suggesting that the pair has more room to go before it makes a technical correction.

• USD/JPY keeps the neutral view near term – UOB