USD/JPY reaches fresh monthly low, trades beneath 109.50
- USD/JPY dip during the New York session, eyeing 109.00
- Dampened market sentiment conditions favor the safe-haven Japanese yen.
- The Volatility Index (VIX) is at four-month highs, triggering a significant sell-off in the US equity markets.
The USD/JPY is sliding in the day, down 0.50%, trading at 109.36 at the time of writing.
Risk-off market sentiment weighs on the USD/JPY pair
Global market sentiment remains downbeat. During the day, most Asian and European Indexes printed losses caused by concerns over a possible default of the Chinese real-estate giant Evergrande.
Evergrande’s spillover reached the US, as most stock indexes are losing between 2.39% and almost 3%. The Volatility Index (VIX), also known as the “fear” index, reaches a four-month high, sitting at 27.53, raising 31%.
The US Dollar Index, which tracks the performance of six peers against the greenback, is flat in the session, at 93.27. The US 10-year Treasury yield is plummeting six basis points, sitting at the 1.309% threshold weighing on the USD/JPY pair.
As there is no medium to high-impact data released on both countries in the day, the USD/JPY main driver would be market sentiment and the US 10-year benchmark rate.
Later on the week, on Wednesday, the Bank of Japan and the Federal Reserve will announce their monetary policy decisions.
USD/JPY Price Forecast: Technical outlook
In the daily chart, the USD/JPY is trading below the shorter time-frame moving averages, suggesting that the pair is under selling pressure. A daily close beneath 109.50 could pave the way for further losses. The first support level on the downside would be 109.00. In case of a breach of the latter, the USD/JPY bears could push the price to the August 4 low at 108.71. A crucial break of that support would expose the 200-day moving average (DMA) at 108.11.
On the flip side, a daily close above the confluence of the 50 and the 100 DMA’s around 109.85-90 could expose 110.00. If a break above 110.00, the bulls could push the USD/JPY pair towards the August 11 high at 110.79.
The Relative Strength Index is at 43.43, slightly lower, favoring the USD/JPY bears.
KEY LEVELS TO WATCH
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
