- A combination of factors dragged USD/JPY to the lowest level since October 11 on Tuesday.
- COVID-19 woes, the risk-off mood benefitted the safe-haven JPY and exerted heavy pressure.
- A steep decline in the US bond yields weighed on the USD and contributed to the downfall.
The USD/JPY pair maintained its heavily offered tone through the early North American session and was last seen trading around the 112.75-70 region, or the lowest level since October 11.
Following the previous day's two-way price moves, the USD/JPY pair met with fresh supply on Tuesday and prolonged its retracement slide from a near five-year peak, around mid-115.00s touched last week. The risk-off impulse in the markets provided a strong boost to the safe-haven Japanese yen. This, along with a broad-based US dollar weakness contributed to the pair's ongoing decline.
The global risk sentiment took a hit amid growing concerns about the potential economic fallout from the spread of the new coronavirus variant. The market worries were exacerbated further after The chief executive of drugmaker Moderna warned that existing vaccines will be much less effective at tackling Omicron than earlier strains of COVID-19.
Meanwhile, the developments surrounding the coronavirus saga pushed back market expectations about the likely timing of when the Fed would begin tightening its monetary policy. In fact, the money markets now indicate a 25 bps rate hike in September 2022 as against July 2022 already priced in. This, along with the global flight to safety, triggered a steep decline in the US Treasury bond yields.
This, in turn, weighed heavily on the greenback and was seen as another factor that aggravated the bearish pressure surrounding the USD/JPY pair. Apart from this, the downfall could further be attributed to some technical selling below the 113.00 mark. Acceptance below the mentioned handle might have already set the stage for an extension of the corrective slide.
Market participants now look forward to the US economic docket, featuring the release of Chicago PMI and the Conference Board's Consumer Confidence Index. The focus, however, will be on Fed Chair Jerome Powell's testimony before the Senate Banking Committee, which might influence the USD. This, along with the broader market risk sentiment, should provide some impetus to the USD/JPY pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.