USD/JPY - US-Japan yield differential continues to rise, still Puts more expensive

US-Japan 10Y yield spread rises in the USD-positive manner.
Still, risk reversals indicate rising demand for USD/JPY puts (JPY calls).

Omkar Godbole FXStreet Contributor

The USD/JPY continues to ignore the rising US-Japan yield differential.

Having topped out at 114.74 in November, the currency pair dropped to a four-month low of 108.50 yesterday. The slide contradicts the rise in the 10-year US-Japan yield differential to the highest level since April 2010.

Yield spread

The spread currently stands at 254 basis points; down 4 basis points from the 8-year high of 258 basis points set on Jan, 22.

Meanwhile, the one-month 25 delta risk reversals fell to a fresh 3.5 month low of -1.35 yesterday, highlighting the USD/JPY put options are more expensive (more in demand).

Clearly, the correlation between the yield differential and the USD/JPY spot has broken down and the risk reversals show investors are prepared for further losses in the pair.

25 delta Risk reversals

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

Ethereum Price Forecast: BitMine extends ETH buying streak, says long-term outlook remains positive

Ethereum (ETH) treasury firm BitMine Immersion continued its weekly purchase of the top altcoin last week after acquiring 45,759 ETH.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.