- 10-year US T-bond yield looks to close more than 5% lower.
- Wall Street's main indexes all lose more than 2% on Wednesday.
- US Dollar Index advances to 98 to limit pair's losses.
The USD/JPY pair retraced a large portion of Tuesday's impressive rally today and now looks to close the day below the 106 mark. As of writing, the pair was down 0.73% on the day at 105.94.
The positive impact of the Trump administration's decision to delay additional tariffs on some Chinese imports on the market sentiment faded away today amid revived concerns over a global economic slowdown. Both retail sales and industrial production data from China fell short of market expectations and Destatis reported a 0.1% contraction in Germany economy in the second quarter.
Risk-aversion dominates markets on Wednesday
The flight-to-safety forced the 10-year US Treasury bond yield to fall sharply and caused an inversion with the 2-year T-bond yield curve for the first time since 2007. Although the yield slump seems to have stalled in the last hours, the 10-year T-bond yield remains on track to close the day with a loss of more than 5%. Stock markets reacted negatively to this development, which is seen as a sign of an upcoming recession, and all three main indexes of Wall Street are down around 2.5% on the day.
The traditional safe-haven JPY capitalized on the risk-off flows and gathered strength against its rivals. In fact, the EUR/JPY pair is now down 1.05% on the day at 118.
On the other hand, the US Dollar Index gained traction despite the sharp fall witnessed in the T-bond yields as the Greenback posted strong gains versus the euro and other risk-sensitive currencies. At the moment, the US Dollar Index is at its highest level since August 5 at 98, limiting the pair's losses for the time being.
During the Asian trading hours on Thursday, industrial production from Japan will be looked upon for fresh impetus but the market's risk perception is likely to continue to drive the pair's action.
Technical levels to consider
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.