• US dollar posts mixt results on Friday ahead of Fed’s week.
  • Risk aversion and lower US yields weigh on USD/JPY.
  • Pair drops for the second week in a row, next support at 113.50.

After a short-lived recovery, the USD/JPY resumed the downside and dropped to 113.59, reaching a fresh one-week low. It is hovering around 113.70, consolidating weekly losses and on its way to the lowest daily close in a month.

USD/JPY extends slide despite Fed’s expected hikes

The combination of risk aversion across financial markets and lower US yields weighed on the USD/JPY during the week. Momentarily it traded above 115.00 on Tuesday, and then resumed the downside.

If the slide continues, the next key level for USD/JPY is the 113.50 area (last week lows) and then 113.20. The negative momentum for the US dollar could be alleviate with a firm recovery above 114.70.

The key event next week is the FOMC meeting. No change in interest rate is expected on Wednesday but a clear sign of a March hike is seen. “A likely March rate hike has been well communicated, so a “prepare for liftoff” signal will not be market-moving. More important will be guidance on QT as well as the funds rate after March. We don’t expect definitive signals, unfortunately; the next dot plot update is in March. The result could be mixed messages”, warn analysts at TD Securities.

Technical levels

This article was originally published by Fxstreet.com.Read the original article here.