At the middle of the day during London's trading session the USD/JPY plummeted. It dropped down to 109.15 by the time of writing.
The rate's drop was paused at that level, as there a monthly pivot point was located at. If that level fails to hold, the rate would aim at the weekly S2 at 108.65.
Bureau of Labor Statistics released the US PPI data, which came out in line with expectations of 0.2%.
According to the release: "The Producer Price Index for final demand rose 0.2 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.6 percent in March and 0.1 percent in February. On an unadjusted basis, the final demand index increased 2.2 percent for the 12 months ended in April."
US Retail Sales will impact USD/JPY
During this week there will be a couple of macroeconomic events, which are notable enough to impact currency exchange rates.On Tuesday morning, the UK Average Earnings Index will be published at 08:30 GMT. This event is the second to the Bank of England rate announcement. Historically the event has caused moves from ten to 24 base points on the GBP/USD.
On Wednesday, Aussie traders have to watch out for the Australian Wage Price Index publication at 01:30 GMT. It is the Australian equivalent of the UK Average Earnings Index.
During the same day, at 06:00 GMT and at 09:00 GMT GDP data will be published in the European Union. Namely, at 06:00 GMT watch the German Preliminary GDP release and at 09:00 GMT the flash EU GDP will be out.
These data sets are not the ones that usually cause big moves. However, during the recent months we have seen changes in that. The EU data has resumed to cause moves on the EUR pairs.
Also on Wednesday, the Canadian CPI and US Retail Sales will be published at 12:30 GMT. The CPI caused moves of 23 to 61 pips since December on USD/CAD. Meanwhile, the US retail sales have created moves from 12 to 40 base points on EUR/USD.
Early on Thursday, at 01:30 GMT the official Australian employment change will be published. The data is expected to cause a minor impact. This event is the last notable of the week.
Watch this week's economic calendar analysis and leave comments with questions about the specifics.
USD/JPY short-term daily review
During the fall most technical support levels were passed. The move might continue until it finally stabilizes by shortly trading sideways. At 13:15 GMT on Monday it looked like the sideways move might occur at the monthly pivot point at 109.12.If this pivot point gets passed, the rate would decline down to the weekly S2 at 108.66, as it is the closest by technical support level.
On the other hand a decline might be followed by a retracement back up. In that case the resistance of the 109.32 level would be targeted. At that level the weekly S1 was located at.
Hourly Chart
On the daily candle chart, it can be seen that the rate has fallen below all of the daily chart's simple moving averages. It indicates that the currency pair is oversold.Although, it does not necessarily indicate that the rate will correct itself by moving up. During sharp fundamental moves the currency exchange rate ignores the SMAs. Moreover, they are forced to sharply follow the exchange rate. Daily chart
On Friday, on the Swiss Foreign Exchange, 56% of the total open position volume was in long positions.
On Monday, during the drop down, already 63% of open position volume was in long positions.
These positions were either set up to profit from a retracement or had suffered losses during the decline.
Meanwhile, trader set up pending orders had become mostly bullish, as 66% of pending commands in the 100-pip range were set to buy.