USD/JPY erases gains and moves toward daily lows

The yen strengthened in the market amid a decline in equity prices in Wall Street. The Dow Jones extended losses affected by a slide in crude oil prices. The WTI is down more than 3% trading near $42.00. The Dow Jones is losing 0.28%.

At the beginning of the American session, USD/JPY rose to test yesterday’s highs near 111.70/80 and then turned to the downside. It dropped to 111.28 and currently is trading at 111.35, standing at the 20-hour moving average. Still far from the lows, it reached on European hours at 111.05. 

Now the pair is trading slightly below yesterday’s closing price, headed toward the second decline in a row. 

US data today showed higher-than-expected numbers with a gain of 1.1% in Existing Home sales in May to an annual rate of 5.62 million (above the 5.55 million expected). 

Regarding the Federal Reserve, FOMC member Harker (current voter) mentioned that a pause in rate hikes could take place as it goes ahead with the balance sheet reduction plan. He added that the normalization of the balance sheet could start in September but a weak inflation could delay the beginning. 

Technical levels 

On a wider perspective, the pair holds a bullish tone. The area around 111.80/112.00 is a strong resistance. The US dollar needs to break higher in order to clear the way to more gains. 

On the downside, below 111.25, support levels might be located at 111.05 (daily low), 110.85  (May 23 & 26 low) and 110.45/50 (May 31 low).