USD/JPY hit one-week low as US 10-yr yield dropped to 10-month low

The Dollar-Yen pair fell to a one-week low of 108.50 in Asia as the US 10-year Treasury yield fell to a 10-month low of 2.054%. 

The curve or spread, between the US 10-year yield and the 2-year yield fell to 76.8 basis points. A narrow spread/flatter yield curve is dollar bearish and vice versa. Moreover, the prospects for the 10-year yield look dim as it has taken out the 61.8% Fib level of the post-US election high low and now looks set to explore levels below 2%. 

The Fed speak has not been encouraging for the USD bulls either. Policymakers continue to call for patience with rate hikes and want to get on with the balance sheet runoff program. 

US index futures drop

The S&P 500 futures are currently down 0.10% in Asia following a 0.76% or 18 point drop in the cash index yesterday. There is a growing unease in the market with the North Korea situation, thus the Asian stocks are under pressure this Wednesday morning. 

Consequently, the Japanese Yen remains bid, although caution is advised as Japan could turn out to be a big loser if the North Korea situation escalates further. Thus, the Yen may not necessarily serve as a reliable safe haven. 

USD/JPY price action

The currency pair has faded spike to the one-week low of 108.50 and currently trades around 108.75 levels. FXStreet Chief Analyst Valeria Bednarik writes- 
“The pair is clearly bearish, poised to extend its decline towards 108.12, the yearly low as the first bearish target to consider. In the 4 hours chart, the price has accelerated well below its 100 and 200 SMAs, whilst technical indicators keep heading lower near oversold readings, supporting further declines on a break below 108.60, the immediate support.”

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Neutral Expanding
1H Bearish Oversold High
4H Bullish Oversold Expanding
1D Bearish Neutral Shrinking
1W Bearish Neutral Low

 

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