USD/JPY recovers modestly following drop below 112 mark
|- The weak risk-appetite continues to weigh on USD/JPY on Tuesday.
- US Dollar Index stays quiet around 96.
- Wall Street recovers modestly from lows.
The USD/JPY came under a renewed selling pressure in the early trading hours of the NA session and fell to a fresh five-day low of 111.94 before recovering slightly. At the moment, the pair is still down 0.6% on a daily basis at 112.12.
With the flight-to-safety becoming the primary driver of the market action on Tuesday, the JPY stays strong against its peers. Following the sharp fall witnessed in both Asian and European equity indices, Wall Street started the day and extended losses to provide an additional boost to the yen. However, it seems like the selling pressure is taking a break in the stock markets with Dow Jones Industrial Average and S&P 500 pulling away from their daily lows. Nonetheless, these indexes are still down 1.75% and 1.85%, respectively.
Commenting on the market sentiment, "The combination of market risk in equities, political risk in Europe - Brexit and Italy - and economic risk around the globe have revived the traditional havens for flailing markets, the Dollar and Treasury assets. It doesn't hurt that the U.S. is also the world's healthiest major economy," FXStreet Senior Analyst Joseph Trevisani said.
Meanwhile, the US Dollar Index, which tracks the greenback against a basket of six major currencies, continues to fluctuate in a tight range below the 96 mark on Tuesday amid a lack of macroeconomic data releases that could impact the market valuation. Later in the session, Atlanta Fed President Bostic is scheduled to deliver a speech.
Technical levels to consider
With a daily close below 112/111.95 (psychological level/daily low), the pair could target 111.70 (100-DMA) on the downside ahead of 111.15 (Sep. 13 low). Resistances, on the other hand, are located at 112.30 (50-DMA), 112.85 (daily high/20-DMA) and 113.30 (Oct. 10 high).
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