USD/JPY drops to one-month lows near 126.30 as US yields fall further
|- Demand for bonds is on the rise amid a deterioration in the global economic outlook.
- US stocks drop on Tuesday boosting further the yen.
- USD/JPY breaks range and extends retreat from multi-year highs.
The USD/JPY ended with days of consolidation with a sharp decline on Tuesday. The pair broke under 127.00 and tumbled to 126.34, the lowest level in a month. It remains near the lows, under pressure amid risk aversion.
The decline of USD/JPY gained momentum on the back of a weaker US dollar, lower yields and as stocks in Wall Street turned red. The Dow Jones is falling 0.83% and the Nasdaq drops by 2.78%. The US 10-year yield stands at 2.73%, a four-week low while the 30-year is back under 3%.
Economic data from the US came in below expectations (PMIs and New Home Sales) and weighed on the greenback. The DXY is falling 0.37%, trading at 101.70, the lowest in almost a month.
Analysts at MUFG Bank, see the USD/JPY pair with a bearish bias, moving in the range 122.00/129.50 during the next weeks. “The main risk to our bearish outlook for USD/JPY would be if global growth concerns eased in the month ahead. A pick-up in China growth could be one potential trigger. The upward impact on global yields, commodity prices and a potential stabilization for global equity markets should encourage a higher USD/JPY even if the USD weakens more broadly. Yen weakness would be more evident though against high beta commodity currencies.”
If the USD/JPY extends the decline, below the 126.30 support line, 126.00 is the next target followed by 125.75 (April 11, 12 high). A recovery now would face an immediate resistance at the 127.00/05 area. Above the next one might be seen at 127.60 and then comes a downtrend line at 128.30.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.