USD/JPY intermarket: investors exit the major as Dow tanks

Ross J Burland FXStreet

Currently, USD/JPY is trading at 108.86, up 0.40% on the day, having posted a daily high at 109.19 and low at 108.38.

USD/JPY has recovered after a poor start to the week, dropping from the 109.20 regions down to 108.31 the low before correcting yesterday evening in early Asia. The price rallied later on in the Tokyo morning from 108.50 and kept rising to 109.17 in late London until the US open where bears capped the bull's progress and profit taking ensued.

US Dollar eases off session highs, awaiting Fed's Beige Book

Meanwhile, the DXY, fairly robust, has been in a range of 99.502 - 99.893, slightly off from the highs currently at 99.80 after a better bid day in London. US 10 year yields have been in a range between 2.1735 - 2.2231, currently up 1.80%. However, the real driver of the downside in USD/JPY have been US stocks.

Dow Jones down 0.36%, weighing on risk sentiment, supporting the yen

While it is a light week of economic events, this will be overshadowed by a flurry of corporate results. Nearly a third of the Dow 30 companies will kick-start earnings season this week. Investor hopes are high for a profitable first quarter, however, the performance today is not so good. The S&P 500 is now just up 0.17% at 2,346.06 after being within a range of 2,343.91 - 2,352.63, but, the Dow's performance is worse.

The Dow is currently at 20,449.87, down 0.36% after being in a range of 20,436.39 - 20,546.69 so far today. The Dow component, IBM Corp. (IBM), dropped 5.2% after the tech giant posted weaker-than-expected quarterly sales late Tuesday. This has weighed on the Dow and USD/JPY within the company's biggest one-day drop since June. The decline took the stock to its weakest level since December and the yen has rallied across the board, notably in AUD/JPY, down 0.39% on the day so far.

USD/JPY levels

USD/JPY may derive some support while above the 55-week ma at 108.36.However, a break to the downside has scope to 107.50 July 2016 high and possibly 106.85, the 61.8% retracement according to analysts at Commerzbank. "Rallies will find initial resistance at 112.20 (55-day ma) but only above 115.62 would we look for a challenge to the key short-term resistance offered by the 16-month resistance line at 117.21."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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