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USD/JPY bounces off fresh lows near 108.70

  • The pair drops to fresh 8-month lows near 108.70.
  • Lower US yields, risk-off trade sustain the downside.
  • Trade, US shutdown, key data to rule sentiment this week.

The renewed buying bias around the Japanese currency is now dragging USD/JPY to fresh multi-month lows in the vicinity of 108.70, levels last seen in May 2018.

USD/JPY looks to risk trends, yields

The pair is down for the fifth consecutive session so far on Wednesday, navigating multi-month lows in the area below the critical support at 109.00 the figure, always against the backdrop of prevailing risk-off sentiment and declining US yields.

In fact, yields of the key US 10-year benchmark are extending their leg lower and are now testing the 2.66% neighbourhood, or fresh 8-month lows.

In the very near term, the risk-off trend could extend further as long as the US government shutdown remains unsolved, rendering in extra support for the pair. In this regard, tomorrow could be a key date as the US Congress is expected to resume its activity tomorrow.

What to look for around USD/JPY?

Ruling out any meaningful changes in the BoJ’s monetary policy stance in the next months, the focus of attention should remain on the Fed’s rate path and its renewed data-dependent stance, while the persistent decline in US yields should keep the pair under pressure for the time being.

USD/JPY levels to consider

As of writing the pair is losing 0.73% at 108.91 and a break below 108.71 (low Jan.1) would aim for 108.11 (monthly low May 29 2018) and then 107.78 (high Apr.13 2018). On the upside, the initial hurdle aligns at 110.40 (10-day SMA) followed by 111.09 (200-day SMA) and finally 111.72 (high Dec.26 2018).

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