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USD/JPY drops below 111 as risk appetite deteriorates

  • US equity futures drop on Thursday.
  • T-bond yields reverse course and erase a large part of yesterday's gains.
  • US Dollar Index stays in the red below 97.

After closing the previous day with an impressive 80-pip gain, the USD/JPY pair reversed its course on Thursday and eased below the 111 mark. As of writing, the pair was down 0.55% on a daily basis at 110.75.

Major equity indexes in the U.S. all recorded their largest daily percentage gains of all time on Wednesday and caused traditional safe-havens such as the JPY to weaken against their rivals. Additionally, a sharp upsurge witnessed in the Treasury bond yields provided a boost to the greenback to allow the pair to extend its rally.

However, with the S&P 500 futures losing more than 1.5% today and the 10-year T-bond yield, which added more than 2% yesterday, erasing nearly 1%, the pair lost its traction. At the moment, the US Dollar Index is at 96.70, down 0.33% on the day. Later in the session, investors will be paying close attention to Wall Street's performance. The U.S. economic docket today will feature weekly jobless claims and consumer confidence figures.

Technical levels to consider

The pair could face the first resistance at 111.60 (200-DMA) ahead of 112 (psychological level) and 112.30 (20-DMA). On the downside, supports are located at 110.30 (Dec. 26 low), 110 (psychological level) and 109.40 (Jun. 25 low).

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