USD/JPY eases below 111, still headed for weekly gains

After refreshing its two-week high at 111.40, the USD/JPY pair started to erase its gains and fell to a new session low at 110.66in the first half of the NA session. After finding support there, the pair retraced some of its losses and is now trading at 110.85, down 0.08% on the day.

The pair's recent fall seems to be fueled by the USD sell-off witnessed following the disappointing consumer confidence data. The University of Michigan Consumer Sentiment Index for June decreased to its lowest level in more than eight months at 94.5 from 97.1. Further details of the report revealed that the Current Conditions sub-index 109.6 from 111.7 and missed the consensus of 113.2. According to the commentary by Surveys of Consumers chief economist, Richard Curtin, consumers have become less optimistic about the future course of the domestic economy.

• UoM: Early June drop of 2.6 points in Sentiment Index masks much larger decline since June 8th

Following the data, the US Dollar Index erased the majority of its gains from Thursday and dropped to 97.10. At the moment, the index is at 97.20, down 0.3% on the day. On the other hand, the major equity indexes had another weak start to the day, further supporting the safe haven JPY against its rivals. 

• US stocks drift lower during opening trade

Despite today's retreat, the pair is headed toward a positive weekly close following four straight weeks of losses. The greenback's recovery in the second half of the week amid the hawkish FOMC statement has been the primary driver of the pair's upsurge.

Technical outlook

The 50-DMA, where the pair started to lose its bullish momentum, aligns as the initial hurdle at 111.40. Although the pair is unlikely to break above this level in the remainder of the session, with a decisive rise in the coming days, it could aim for 112 (psychological level/200-DMA) and 112.70 (May 17 high). On the downside, supports are located at 110.55 (20-DMA/Fib. 61.8% retracement of Apr. 17/May 10 uptrend), 110 (psychological level) and 109.40 (Jun. 15 low).

• USD/JPY still neutral, room for a test of 111.70 – UOB