USD/JPY plummets to 2-week lows near 112.60 amid flight-to-safety

U.S. Treasury yield curve inversion weighs on the sentiment.
Risk-off mood boosts the demand for JPY.
Wall Street falls sharply on Tuesday.

Eren Sengezer FXStreet

The risk aversion in the second half of the day helped the JPY find demand as a safe haven and the USD/JPY pair extended its slide to a fresh 2-week low 112.59. As of writing, the pair was trading at 112.62, losing 0.93%, or 106 pips, on a daily basis.

The sharp drop witnessed in the U.S. T-bond yields on Monday and Tuesday accompanied by an inverted yield curve between two-year and five-year notes for the first time since the financial crisis revived concerns over a possible economic slowdown. After starting the day modestly lower, major equity indexes suffered heavy losses with both the S&P 500 and the Nasdaq Composite losing over 3% in the session. At the moment, the 10-year T-bond yield is losing 3.35 at 2.9%.

On the other hand, the US Dollar Index, which fell to the 96.40 area earlier in the day, recovered toward the 97 mark in the last hour as the greenback was chosen over more rate-sensitive currencies but not the JPY. As of writing, the DXY was up 0.03% on the day at 96.97.

Technical levels to consider

The next support for the pair aligns at 112.35 (100-DMA) ahead of 112 (psychological level/Oct. 24 low) and 111.40 (Oct. 26 low). On the upside, resistances are located at 112.90 (50-DMA), 113.25 (20-DMA), 113.65 (daily high).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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