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Risk aversion drives USD/JPY lower

  • Risk-off in Asia pushes the Yen higher.
  • USD/JPY rejected at 200-day MA.

A move higher to 113.70 (200-day MA) in USD/JPY has been undone, courtesy of the risk aversion in the Asian equity markets.

As of writing, the USD/JPY pair is down 0.12 percent at 111.40. The Nikkei is down 0.3 percent and Shanghai Composite is down 0.80 percent. However, the 10-year US-Japan yield differential remains flatlined at 231 basis points.

Further, the spread between the US 10-year yield and the 2-year yield is stagnant at a decade low of 59 basis points.

Looking ahead - The decline in the USD/JPY pair could gather pace if the European equities drop and the yield curve flattening resumes.

USD/JPY Technical Levels

Jim Langlands from FX Charts writes, " The daily momentum indicators are still looking heavy, and a test of 111.00 – and lower – would not surprise at some stage although the shorter term charts are still pointing higher and it may be worth waiting to see if we can head back towards the important 111.70 area. A break of 111.70 would allow a squeeze towards 112.00/20 where there is equally strong resistance, so stops on shorts should be left above here."

 

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