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USD/JPY dips to one-month low even as S&P 500 futures decline

  • USD/JPY feels the pull of gravity as Fed vows to keep policy easy to support the economy.
  • Powell's comments reinforce expectations for yield curve controls. 
  • The dollar may find bids if stocks turn risk-averse. 

USD/JPY is reporting losses for the fourth straight day amid weak tone in the US stock index futures and broad-based losses in the US dollar. 

The pair is currently trading near 106.95, representing a 0.15% decline on the day, having put in a low of 106.89 a few minutes before press time. That was the lowest level since May 15. 

The 0.40% decline in the futures tied to the S&P 500 is clearly not helping the US dollar, which is slightly confounding, given markets have been treating the greenback as a haven currency since the beginning of the coronavirus outbreak. 

The greenback is feeling the pull of gravity, possibly due to dovish comments by the US Federal Reserve President Jerome Powell. 

The Fed chief said on Wednesday that policymakers had a full discussion about employing yield curve controls. His comments reinforced expectations that the Fed is planning to implement yield curve controls in the near future. In addition, the Fed presented a dour economic outlook, pouring cold water over the optimism generated by last Friday's stellar Nonfarm Payrolls. 

Looking forward, the dovish Fed and the rally in EUR/USD may keep the dollar on the defensive against majors. EUR/USD jumped to a three-month high of 1.1422 on Wednesday and remains bid near 1.14 at press time. 

However, if the risk aversion worsens, investors could seek safety in the US dollar, stalling the decline in the USD/JPY pair. 

Technical levels

    1. R3 108.55
    2. R2 108.21
    3. R1 107.67
  1. PP 107.33
    1. S1 106.78
    2. S2 106.44
    3. S3 105.9

 

Author

Omkar Godbole

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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