After a strong rally during Monday’s American session, the US dollar pulled back on Tuesday. On the back of a decline in US equity prices and a recovery in Treasuries that pushed yields to the downside. Economic data from the US (housing starts, building permits, and industrial production) didn’t help the US dollar and USD/JPY continued to move slowly to the downside.
For the first time after five consecutive days, the US dollar did not reach monthly lows versus the yen. But still is about to end the day in negative territory and testing the 108.30/40 support area. The recovery gave signals of exhaustion above 109.00 and it started to pullback. Despite the sharp slide of the DXY, the decline in the pair appeared to be normal. Risks of a bearish acceleration would increase with a decline under 108.30, that would expose the 108.00 handle. Below, the area around 107.70 is an important support, that could defend the US dollar of a more significant slide. The short-term and the dominant bias favor the yen.
Support levels: 108.40 108.20 107.70
Resistance levels: 108.80 109.30 109.70