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USD/JPY heads for the lowest close in 4 months

  • Japanese yen rises across the board amid risk aversion, Dow Jones drops 1% after worst week since the financial crisis. 
  • USD/JPY falls for the seventh-day in-a-row, breaks firmly below 111.00.

The USD/JPY broke below 110.90 and tumbled to 110.24, hitting the lowest intraday level since August 22. The pair then bounced modestly to the upside, rising to the 110.40/50 area. It is headed for the lowest close in four months. 

The US dollar continues to be unable to find support again the yen. It has fallen now 500 pips since December 13. Higher US yields, uncertainty about the US economic outlook and US politics weighs on the US dollar. At the same time, the Japanese yen is stronger amid risk aversion. Wall Street is falling again today after having last week the worst performance since 2008. The Dow Jones was down 1.0%, at the lowest in more than a year. US bond yields were also lower. 

Secretary Mnuchin talks with bankers trying to curb uncertainty regarding Trump’s actions. At the same time, US President is back on Twitter, criticizing the Federal Reserve. His last tweet was: “The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!”

The trend continues to signal more losses ahead for USD/JPY while short-term technical indicators show oversold extreme readings. Below 110.25, the next support could be seen around 110.00, followed by 109.70/75 (August low). To the upside, the area around 110.90/111.00 has become a strong resistance. 
 

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