USD/JPY prints fresh six week low at 109.70

The yen was the best performer on Friday and sent USD/JPY down from 110.80 to 109.74 for a six-week low which has now been exceeded. The pair had tried to correct but sellers are stepping in as Tokyo gets going with a risk-off tone following last weeks bearish diversion in yields and poor data releases from both Germany and the US.

As for yields, the US 10yr treasury yield fell from 2.53% to 2.42% - That was the lowest since Jan 2018. The 2yr yield fell from 2.40% to 2.30% - and the difference between 2yr and 10yr yields – 12bp – is the lowest since Dec. Meanwhile, there is growing speculation that the Fed will be forced to cut rates before the year is out, and the Fed funds futures are now pricing an increased chance of it by as much as 60%.

Looking ahead

It is a quiet start tot he week on the calendar, although attention will turn to Charles Evan today in Hong Kong Credit speaking on a panel and delivering a keynote at the Credit Suisse Asian Investment Conference. We will then have Fed's Harker speaking at the OMFIF City Lecture in London.

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that USD/JPY's bearish case is strong, according to the daily chart:

"The pair fell roughly 150 pips below its 100 and 200 DMA, after spending pretty much two weeks struggling around them."

"Technical indicators in the mentioned chart head firmly lower within negative levels and nearing oversold readings with no signs of changing course."

"In the shorter term, and according to the 4 hours chart, the pair shed over 100 pips after failing to surpass its 200 DMA, currently around 110.90, while the 100 DMA turned lower far above the longer one."

"The Momentum indicator stalled at oversold levels, while the RSI indicator keeps heading south, currently at 23, both adding to the bearish case."