USD/JPY edges lower toward 112 as greenback remains under pressure

The USD/JPY pair came under a modest selling pressure in the early NA session and refreshed its daily low at 112.08 in the last hour. As of writing, the pair was trading at 112.22, losing 0.2% on the day.

The recent drop witnessed on the pair seems to be a product of an increasing selling pressure on the greenback. After not delivering any comments in his speech earlier in the day, Chicago Fed President Evans spoke on Bloomberg TV and said that it would be premature to make a call on a possible December rate hike and further added that is the inflation was off target, tightening could be less constructive. Weighed by these dovish comments, the US Dollar Index eased to its lowest level since late September at 92.78 and was last seen at 92.80, losing 0.33% on the day.

• Fed’s Evans: Premature to make call on December hike - BBG TV

On the other hand, major equity indexes in the U.S. started the day little changed with the Dow Jones Industrial Average adding 0.2% and the S&P 500 losing 0.2% at the moment, keeping the pair's losses limited for the time being.

Later in the session, the FOMC is going to release the minutes of the September meeting. “We expect the minutes from the September meeting to reflect the amount of debate among participants about recent inflation weakness. However, there will likely also be some debate surrounding the FOMC’s evaluation of financial conditions and asset prices," Nomura analysts pointed out in a recent report.

• FOMC minutes to reflect the debate among participants about recent inflation - Nomura

Although the CME Group FedWatch Tool suggests that the probability of a December rate hike is above 90%, a dovish statement from the Fed could hurt the expectations and drag the DXY lower.

Technical outlook

On the downside, 112.00 (Oct. 10 low/psychological level) remains as the first critical support ahead of 111.40 (200-DMA) and 110.75 (50-DMA). On the flip side, resistances could be seen at 112.45 (20-DMA), 113.45 (Oct. 6 high) and 114.50 (Jul. 11 high).

• USD/JPY back to neutral stance – UOB