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USD/JPY drops to multi-month lows below 107.50 amid escalating geopolitical tensions

  • US 10-year T-bond yield extends losses, erases more than 2% on Thursday. 
  • US Dollar Index rebounds from lows, stays below 98 mark.
  • S&P 500 retreats after reaching a fresh record high at the opening.

After dropping to its lowest level since early January at 107.47, the USD/JPY pair retraced a small portion of its daily fall but came under renewed bearish pressure in the American session. As of writing, the pair was down 0.62% on a daily basis at 107.42.

The broad-based USD weakness following the FOMC's dovish policy statement and Chairman Powell's cautious remarks yesterday weighed on the pair on Thursday. Although the pair tried to gain traction after Wall Street opened the day in the positive territory and the S&P 500 reached a fresh record high, heightened expectations of the Fed announcing a rate cut as early as July dragged the US Treasury bond yields and didn't allow the positively-correlated pair to stage a meaningful recovery. At the moment, the 10-year reference is losing nearly 2% on the day and looking to close below 2% mark for the first time since November of 2016.

Moreover, the escalating geopolitical tensions in the Middle East seems to be weighing on the market sentiment. When asked about whether the U.S. would strike Iran amid the ongoing crisis, "you'll soon find out," U.S. President Donald Trump told reporters.

Meanwhile, the US Dollar Index, which lost more than 1% since yesterday, was last seen at 96.63, losing 0.6% on the day and making it easy for the pair to continue to push lower. 

 In the early trading hours of the Asian session, Nikkei Manufacturing PMI and Consumer Price Index data from Japan will be looked upon for fresh impetus.

Technical levels to watch for

 

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