The USD/JPY pair appears to have defied the risk-off flows, as the JPY bulls lost control following reports of BOJ buying JGBs today.
The 5-year JGB yields dropped sharply and hit fresh three-month lows, which prompted fresh yen selling across the board and aided the recovery in USD/JPY from near two-week troughs of 111.91.
The recovery in the pair can be also attributed to a rebound in the treasury yields from Friday’s sell-off. The spot is last seen exchanging hands at 112.21, heading back towards daily highs reached pre-Tokyo at 112.32.
The major dived at Tokyo-open as risk-off gripped markets and boosted the safe-haven yen, after the traders reacted to the weekend’s reports of calls for another Scottish referendum by the UK PM May.
Additionally, vagueness on Trump’s tax cuts and fiscal plans to revive the US economy weighed on the greenback, and eventually on the USD/JPY pair.
Later today, the spot looks forward to the US durable goods and pending home sales data for fresh incentives, while the next big event for the buck remains Trump’s address of a joint session of Congress.
USD/JPY Technical levels to watch
The major finds immediate resistance at 112.32 (daily high). A break above the last, the major could test 112.49 (5-DMA) and 112.83/98 (10 & 20-DMA) beyond the last. While to the downside, the immediate support is seen at 111.91 (2-week low) next at 111.70 (Feb 9 low) and below that at 111.50 (round figure).
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